Mercantile Building Society has introduced the two-year fixed rate mortgage.
Specifically aimed at first-time buyers in the North East of England, the mortgage has a fixed rate of 5.49 per cent until August 1, 2003 for loans of up to 80 per cent of valuation.
The mortgage can be used to buy properties in Northumberland, Tyne & Wear and County Durham. It has an arrangement fee of £195 and comes with free unemployment assurance for the first year of the loan. It has a redemption penalty of 4 per cent of the advance in the first year and 3 per cent of the advance in the second year.
In an attempt to stave off a recession the Bank of England has cut interest rates steadily over the first seven months of 2001. As a result many lenders have also cut their rates to appeal to borrowers. According to the Council of Mortgage Lenders the average fixed rate mortgage rate was 6.22 per cent for the first quarter of 2001. For the second quarter of 2001 this had reduced to 5.94 per cent.
According to Moneyfacts on August 7, 2001 the most competitive two-year fixed rate mortgage is from Yorkshire Building Society. This has a fixed rate of 5.19 per cent for loans of up to 75 per cent of valuation. The Yorkshire mortgage has an arrangement fee of £295. It also has a slightly more competitive redemption penalty of 3 per cent during the fixed rate period. However the biggest difference between the two mortgages is that the Yorkshire Building Society product is available to anyone wanting to buy a property anywhere in the UK, unlike the Mercantile product which is restricted to properties in the North East of England.