Manchester Building Society is looking to the future with the introduction of the permanent discount mortgage.
The mortgage has a 0.6 per cent discount for the life of the loan. This gives it an in initial rate of 6.4 per cent for loans of up to 85 per cent of valuation. Employed applicants must have been in their present job for at least six months and the self-employed must be able to supply two years accounts.
Applicants with county court judgements (CCJs) are limited to a maximum amount of £250, and these CCJs must be over three years old. There is a redemption penalty of three months interest during the first five years of the loan and the mortgage is only available to buy properties in Wales and England.
Manchesters mortgage adds to the limited number of providers that offer a discount for the full term of the mortgage. There are only 12 providers offering this type of mortgage.
According to Moneyfacts on August 17, 2001 the most competitive permanent discount mortgage is from Loughborough Building Society. This has a discount of 0.8 per cent for the term of the mortgage, giving it a payable rate of 5.55 per cent for loans of up to 90 per cent of valuation. It has free accident, sickness and unemployment cover for a year. But unlike the Manchester product it is not portable and the redemption penalty is one months interest for the full mortgage term. This may put some borrowers off.
Having a mortgage that is discounted for the term of the loan may appeal to borrowers who are looking for a product that they do not have to constantly oversee. However, this can be the lazy way out. There may be more competitively priced mortgages on the market, and applicants could save money by shopping around.