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Market Harborough ties it up

MARKET HARBOROUGH BUILDING SOCIETY

2 Year Fixed Rate 2.39%

Type: Fixed-rate mortgage

Fixed term: Two years

Fixed rate: 2.39%

Minimum loan: £30,000

Maximum loan: Up to 90% of valuation subject to a maximum of
£500,000

Income multiples: Up to 90% of valuation &#45 three times principal
income plus second or 2.5 times joint. Up to 75% of valuation &#45 3.25
times principal income plus second or 2.75 times joint.

Arrangement fee: £295

Flexible features: Payment holidays, lump sum withdrawals up to
85% of valuation, interest calculated daily

Conditions: Capital repayments of up to 10% a year allowed without
penalty, £40 charge if Market Harborough contents insurance not
taken, free ASU cover for first three months

Redemption fee: 5% of amount repaid in first three years, 3% in year
four, 2% in year five, thereafter one month&#39s interest

Introducer&#39s fee: Up to 75% of valuation &#45 £300, up to 90% of
valuation £375

Tel: 01858 463244

Borrowers who redeem Market Harborough Building Society&#39s 2 year
fixed rate mortgage at 2.39 per cent will incur a penalty of between 5
per cent and 2 per cent of the amount repaid during the first five
years.

London & Country mortgage specialist David Hollingworth believes
the starting point when assessing how good any product is just how
suitable it will be for clients themselves. He says: ” One of the main
factors will generally be the interest rate payable on the product and
undoubtedly 2.39 per cent is a very low rate &#45 unfortunately too good
to be true. Predictably, the redemption penalties last beyond the
two-year fixed period for a further three years, locking the borrower
into the standard variable rate.”

He thinks that other than the rather large hurdle of the redemption
fee, the product&#39s fees are nothing out of the ordinary. He says: “It has
a pretty standard £295 arrangement fee and the scheme affords
some flexible features, with a 10 per cent penalty-free overpayment
facility each year. Adviser remuneration is in the form of a flat fee,
although this seems pretty irrelevant bearing in mind the tiny number
of borrowers for whom this product might be the most suitable
product.”

Hollingworth feels the extended penalty model for mortgages is
outmoded as there are large numbers of excellent deals available
without extended penalties. He explains: “The problem with extended
penalties is that they simply don&#39t add up to the best value for the
customer and also present the very real risk of payment shock when
the rate leaps from a very low interest rate of 2.39 per cent to the
much higher variable rate. Even if the variable rate remains at today&#39s
level a borrower could see their payments more than double from
one month to the next &#45 this could be even worse if the standard
variable rate has increased.”

Looking at potential competitors for the mortgage Hollingworth says:
“If we assume that a borrower is adamant that they want this type of
product, then the Market Harborough deal will certainly appeal. But
there is a good chance that they will be tempted by the even lower
rate offered by Portman&#39s 1.99 per cent two-year fixed rate, although
the penalties last even longer &#45 for six years in total.”

He says the best two-year fixed rate on the market is another
Portman deal, offering a rate of 4.25 per cent and no penalties
beyond the fixed-rate term, leaving the borrower free to review their
options at the end of the fixed rate period.

BROKER RATINGS:

Suitability to market: Poor

Competitiveness of mortgage rate:Poor

Adviser remuneration: Average

Overall 2/10

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