Leeds & Holbeck Building Society is giving borrowers a novel choice with the introduction of the 50/50 mortgage.
The mortgage is divided into two parts. One part will be operated as a discounted rate mortgage with a discount of 1.35 per cent until January 1, 2003. The other part will be run as a ten-year fixed rate mortgage with a rate of 5.99 per cent. Both parts are available for loans of up to 90 per cent of valuation.
The mortgage is aimed at people whose jobs mean they can expect large bonuses. They can use these bonuses to pay off the discounted rate part of the mortgage by January 1, 2003. If this part is not repaid by then, the discounted rate part is transferred into the fixed rate part of the mortgage. It might appeal to people who want the security of a fixed rate product, but who initially want to benefit from a discount, getting the best of both worlds.
There are no redemption penalties on the discounted rate part of the mortgage, while the fixed rate part has redemption penalties of six months interest for the first five years and three months interest for the remaining five years of the fixed rate period.
Leeds & Holbeck has also joined a very small number of lenders offering a ten-year fixed rate mortgage. The other lenders that offer these are Newcastle, Kent Reliance, Britannia and Marsden building societies and Birmingham Midshires.
However, this is a unique product, as it is the only product on the market to combine a discount with a ten-year fixed rate. But interest rates have fallen steadily over the first half of 2001 and there is currently little demand for a ten-year fixed rate product.