Market Harborough has introduced a flexible mortgage that has a two year discount.
The mortgage has a 2.50 per cent discount for two years, giving a payable rate of 4.49 per cent. It is available for loans of up to 80 per cent of valuation and there is no arrangement fee.
Borrowers can overpay up to 10 per cent of the loan, but if they exceed that amount, the extended tie-in comes into play. The redemption penalty decreases by one per cent for each year in the first five years. Five per cent of the advance is payable in the first year and one per cent is payable in year five.
Interest is calculated on a daily basis and borrowers can take payment holidays and make lump sum withdrawals, but they cannot make underpayments.
According to Moneyfacts on April 5, 2001, there are no similar mortgages on the market. The Market Harborough mortgage is not an obvious choice for first-time buyers as it requires a large deposit. However, figures from the Council of Mortgage Lenders show that the average percentage of advances is falling.
In 1996, first time buyers borrowed an average of 90 per cent of valuation. This fell to an average of 80 per cent by 2000.
The Market Harborough mortgage offers a good rate, but the extended tie-in and limited flexible features let it down.