Ipswich Building Society has introduced a three year fixed rate mortgage that is available for loans of up to 95 per cent of valuation.
The mortgage is fixed at 5.99 per cent until October 31, 2004 and has an arrangement fee of £295. Borrowers who redeem during the fixed rate period must pay 2.5 per cent of the original advance.
The latest figures from the Council of Mortgage Lenders show that fewer borrowers are choosing fixed rate mortgages. In May 2001, fixed rate mortgages accounted for 30 per cent of new business and variable rates represented 70 per cent. In May 2000, fixed rate mortgages accounted for 34 per cent of new business and variable rates represented 66 per cent.
Borrowers may be wary of fixed rates because the recent series of interest rate cuts has created uncertainty about which way interest rates will go in future months.
According to Moneyfacts on June 20, 2001, Yorkshire Building Society has a fixed rate mortgage at 5.59 per cent for the first three years. This is more competitive than the Ipswich Building Society mortgage. However, where borrowers redeem the full amount of their mortgage during the fixed rate period they must pay a higher penalty of 3 per cent of the amount repaid with the Yorkshire Building Society.