Exclusive Connections has designed a flexible 100 per cent mortgage with a two-year discount.
The mortgage has a 1 per cent discount for the first two years, giving a current payable rate of 5.50 per cent. Borrowers can overpay, underpay and take payment holidays, but interest is calculated monthly rather than daily and lump sum withdrawals are not allowed.
Borrowers who pay the mortgage off early are tied in for one year beyond the fixed-rate period. They must pay three months' interest as a penalty during the first three years.
First-time buyers are allowed an extra allowance of up to 2 per cent of valuation towards moving costs and all other borrowers can take up to 5 per cent of valuation.
According to Moneyfacts on November 16, 2001, it is possible to get a more competitive payable rate with Pink Home Loans. It has a 1.5 per cent discount for two years, which gives a current payable rate of 4.5 per cent.
The flexible features are slightly different to the Exclusive Connections mortgage as underpayments, overpayments and lump sum withdrawals are allowed, but payment holidays are not. The lump sum withdrawal facility is only available to borrowers with loans of up to 95 per cent of valuation, so this compromises its claim to be a flexible 100 per cent mortgage.
The penalty for paying off the Pink Home Loans mortgage early is also three months' interest during the first three years. There is little to choose between the mortgages. However, borrowers keen to use Pink Home Loan's lump sum withdrawal facility may get a better deal with a 95 per cent mortgage.