Furness Building Society has unveiled a five-year capped rate mortgage that is available for loans up to 80 per cent of valuation and a maximum loan of £150,000.
The mortgage is capped at 5.99 per cent until June 19, 2006 and borrowers who redeem it within this period must pay 5 per cent of the advance as a penalty.
As an extra incentive to opt for this mortgage, borrowers are offered free accident, sickness and unemployment for the first year.
Capped rate mortgages tend to have higher interest rates than fixed rate mortgages as they protect borrowers from interest rate rises but will come down if interest rates fall. However, the Bank of England base rate has been cut three times this year and some borrowers may prefer a five-year fixed rate deal if they feel further falls are unlikely.
According to Moneyfacts on July 27, 2001, there are no direct comparisons to this mortgage. However, Coventry Building Society is offering a five-year capped rate at the same rate for loans of up to 95 per cent of valuation with a maximum loan of £1m, which may be more useful to first-time buyers, particularly those buying properties in London and the South East.
Borrowers who redeem this mortgage early must pay six months' interest as a penalty, which is currently lower than Furness. Borrowers who pay off a £100,000 mortgage during the capped rate period will currently pay £3,500 with Coventry and £5,000 with Furness.