The MarketPlace, Bradford & Bingley's IFA division, is offering a mortgage that has a stepped discount for three years.
It is available for loans of up to 90 per cent of valuation and has a 1.85 per cent discount in the first year, giving a payable rate of 5.15 per cent. A 1.5 per cent discount is offered in the second year and a 1.25 discount in the third year.
Borrowers also get a £1,000 cashback, but if they redeem the mortgage during the discount period, they must pay an early redemption penalty which reduces by one per cent in year from 3 per cent in the first year to 1 per cent in the third year.
According to Moneyfacts on July 25, 2001, Norwich Union has a similar mortgage that is available for loans of up to 90 per cent of valuation.
It has a more competitive one-year discount of 2 per cent discount in the first year, giving a current payable rate of 4.74 per cent. However, the 1 per cent in year two and 0.5 per cent discount in year three are not so competitive with the MarketPlace mortgage. Borrowers who redeem the Norwich Union mortgage during the discount period pay a flat redemption penalty of three months' interest which is lower than the MarketPlace's in years one and two.
Borrowers paying off a £90,000 mortgage in the first three years would pay £1,518 with Norwich Union. With MarketPlace, they would pay £2,700 in year one, £1,800 in year two and £900 in year three.