Melton Mowbray Building Society has introduced a two-year fixed rate mortgage that is available for loans of up to 75 per cent of valuation.
The mortgage is fixed at 5.6 per cent until August 31, 2001 and borrowers who redeem during the fixed rate period must pay six months' interest as a redemption penalty. The mortgage also has an arrangement fee of £295.
According to Moneyfacts on July 16, 2001, the Yorkshire Building Society has a similar two-year fixed rate mortgage that has a more competitive rate of 5.19 per cent. Free accident, sickness and unemployment insurance is offered for the first six months and borrowers who redeem the mortgage during the fixed rate period must pay 3 per cent of the sum repaid as a penalty.
Figures from the Council of Mortgage Lenders show that ASU policies are becoming more popular since the Government joined lenders and insurers in trying to boost their take-up rate. In 1998, 1,887,000 policies were in force and by 2000, this had increased by 25 per cent to 2,356,000 policies.
Because of the rising popularity of ASU policies, the Yorkshire Building Society's six month offer could be an additional incentive.
Borrowers redeeming an £80,000 capital and interest mortgage over 25 years during the fixed rate period will pay a penalty of £2,756 with the Melton Mowbray and £2,400 with Yorkshire Building Society.