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Mercantile discount offers protection incentive

Mercantile Building Society is offering a discounted rate mortgage that has a 1.15 per cent discount until August 1, 2004.

The mortgage is available to all borrowers for loans of up to 95 per cent of valuation with a maximum loan of £250,000 and has a current payable rate of 5.74 per cent. If borrowers redeem the mortgage during the first three years, the discount is reclaimed.

Free unemployment insurance is offered for the first 12 months and basic valuation fees are refunded up to a maximum of £200. Legal costs are free for those remortgaging if the Society&#39s solicitors are used and first time buyers are offered a £250 cashback.

Borrowers may be more keen on discounted rate mortgages if they feel that further interest falls are unlikely this year, so this mortgage will suit their needs. Some borrowers may look for a discounted rate deal with no redemption tie-in, but the discounts may be lower to compensate for this.

According to Moneyfacts on July 31, 2001, Cheshire Building Society has a more competitive three-year discounted rate mortgage. It has a 1.4 per cent discount for three years, giving a current payable rate of 5.39 per cent. Like the Mercantile mortgage, borrowers who redeem during the first three years must repay the discount.

Free accident sickness and unemployment protection is offered and this is more extensive than Mercantile&#39s free unemployment cover, but it is offered for just six months.

The downside of the Cheshire&#39s discount is felt if the mortgage is redeemed early, Borrowers who pay off a £100,000 mortgage during the first three years would pay £1,150 with the Mercantile and £1,400 with Cheshire.

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