Inter-Alliance Mortgage Service has introduced the 9.2 per cent step-down mortgage.
The mortgage is aimed at the adverse credit market, consisting of people who have a bad credit history and has an initial rate of 9.2 per cent for loans of up to 85 per cent of valuation. As long as customers can keep up the payments, this steps down by 0.75 per cent at the end of the first year, 0.75 per cent at the end of the second year and then 0.5 per cent at the end of the third year.
Borrowers can have any number of county court judgements (CCJs) up to a maximum amount of £7,500. The mortgage also has extended redemption penalties of five month's interest in the first four years.
According to analysts Datamonitor in 1999 the adverse credit mortgage market totalled £5.9bn, up from the previous year's total of £4.98bn.
This mortgage joins the very small number of stepped adverse credit mortgages on the market. According to Moneyfacts on April 9, 2001 the cheapest stepped rate adverse credit mortgage is the 8.75 per cent mortgage from Bristol & West. This has a rate of 8.75 per cent for the first two years, stepping down to 7.25 per cent thereafter for loans of up to 85 per cent of valuation. Borrowers can have any number of CCJs up to a maximum of £10,000, while redemption penalties are three per cent of the advance in year one, two per cent in year two and one per cent in year three.