Britannic Money has designed a flexible mortgage with a current account facility.
The flexible start mortgage is available for loans of up to 95 per cent of valuation and has a two-year discount. In the first year, borrowers get a 3 per cent discount, giving a payable rate of 3.99 per cent. In the second year, a 2 per cent discount is offered with a payable rate of 4.99 per cent.
In the first three years, borrowers can overpay by up to 5 per cent without incurring the early redemption penalty of 5 per cent of the original advance.
Underpayments, payment holidays and lump sum withdrawals are allowed but these features relate to the limited overpayments that can be made. Interest is calculated daily.
In years four and five, there is no early redemption penalty for overpayments unless borrowers redeem the full amount. This is when the mortgage becomes fully flexible.
According to Moneyfacts on July 3, 2001, this is the only mortgage of its type. However, the most competitive rate for similar current account mortgages is the Woolwich's open plan offset at 5.40 per cent for two years. This mortgage has a higher rate than the Britannic Money and those who redeem more than 10 per cent of the mortgage in the first two years must pay 8 months interest.
Some borrowers may want full flexibility from day one and may choose the Woolwich mortgage despite the higher rate. Others may decide a lower rate takes priority over flexibility and the Britannic Money mortgage could be more attractive in this case.