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Manchester sees benefits in discount

Manchester Building Society has brought in the three-year discount mortgage.

Available for loans of up to 80 per cent of value, the discount is 1.5 per cent in the first three years of the loan, giving it a current payable rate of 5.5 per cent. Interest is calculated monthly.

Employed applicants must have been in their present job for at least six months, while the self-employed must be able to supply two years’ of accounts to prove their income.

Manchester will pay basic valuation fees, provided that its own valuers are used. There is an arrangement fee of £195 and an extended redemption penalty. If the mortgage is repaid in the first five years then the Manchester will reclaim the total of the valuation and administration fees paid, as well as any legal fees from a remortgage.

The mortgage is only available on properties in Wales and England.

The Bank of England monetary committee has cut interest rates throughout 2001 in order to fend off a recession. According to the Council of Mortgage Lenders on July 31, 2001, the first quarter of 2001 saw sales of 288,000 variable rate mortgages, which include discounted rates, in comparison to sales of 132,000 fixed rate mortgages. The second quarter saw this rise to 364,000 loans of variable rates and 155,000 fixed rates.

Over the past few years the UK has seen low and stable interest rates, leading to complacency among borrowers who think that interest rates will not increase again. But those borrower may have short-term memories and have forgotten about the property crash that occurred at the end of the 1980s.

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