Leeds & Holbeck has introduced a five-year fixed-rate buy-to-let mortgage that is available for loans of up to 80 per cent of valuation.
The mortgage is fixed at 5.89 per cent until February 1, 2007 and borrowers who pay the mortgage off during this period must pay a penalty of six months' interest in the first three years and three months' interest in the remaining two years. Borrowers can overpay by up to 10 per cent a year without incurring the penalty.
Research from the Association of Residential Letting Agents (ARLA) shows that properties in London and the South East have higher capital values than in the rest of the country, but higher rental yields are to be found in the North. This is something borrowers may need to consider alongside their objectives for income, growth or a combination of both.
According to Business Moneyfacts on October 8, 2001, this mortgage is the most competitive of its kind. The next most competitive rate is from Yorkshire Bank, which is fixed at 6.39 per cent until September 30, 2006.
It is available for loans of up to 80 per cent of valuation and borrowers who pay off the mortgage within the first five years must pay an early redemption penalty. This amounts to 5 per cent of the sum repaid in the first two years which then reduces by 1 per cent each year until year five, when the penalty is 2 per cent of the sum repaid. This is higher than Leeds & Holbeck for all five years of the fixed-rate period.
Borrowers who redeem a £500,000 mortgage would pay £25,000 in years one and two with Yorkshire Bank, reducing to £10,000 in year five. Those with Leeds & Holbeck would pay £16,475 in the first three years and £8,237.50 in the remaining two years.