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Leeds criticised over 1.89% loan deal

Leeds Building Society has been slammed by IFAs for marketing a mortgage to first-time buyers that sees monthly payments jump by almost 350 per cent after two years.

Leeds says the 1.89 per cent headline rate is designed to help FTBs and young professionals get on the property ladder but it locks borrowers into its standard variable rate – currently 6.5 per cent – for four years after the fixed period. Redemption char- ges are levied in the first six years.

The society says salary increases will help borrowers plan for the reversion to SVR but IFAs claim the loan could encourage people to get into debt.

In this week’s Broker Review, London & Country mortgage specialist James Cotton says anyone who can only afford repayments at 1.89 per cent is not in a position to take out a mortgage, let alone cope with the rate hike in year three.

The Mortgage Practitioner sole trader Danny Lovey says: “It is outrageous and irresponsible. I would not touch it with a barge- pole. This is the sort of thing that gets people into bad debt.”

Money & Mortgages managing director Marc Harrison says: “Few people wake up after two years with thousands of pounds more in disposable income.”

Leeds head of marketing and PR Karen Wint says: “Intermediaries and branch staff would only recommend this product under current regulations after assessing the specific needs of each client. As part of this process, the product features would be transparent from the outset.”

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