Mercantile Building Society is looking to the long-term mortgage market with the introduction of its lifetime discount mortgage.
The mortgage has a discount of 1.1 per cent for the term of the mortgage, giving it a payable rate of 5.54 per cent for loans of up to 80 per cent of the value of the property. For properties outside the northeast of England then the maximum loan amount available drops to 75 per cent.
Mercantile is also lending a helping hand to borrowers, with a contribution of up to £200 towards basic valuation costs and free unemployment insurance for the first year. There is no redemption penalty if the borrower pays back the mortgage early on in the life of the mortgage.
This is a niche area of the market, as according to Moneyfacts there are only 26 mortgages with a lifetime discount on the market, provided by 14 companies. Lower rate mortgages are available, with the lowest coming from Marsden Building Society. This has a 3 per cent discount for the first year followed by a 0.5 per cent discount for the remaining term of the mortgage, giving it a payable rate of 3.3 per cent for loans of up to 90 per cent of valuation.
The Marsden mortgage offers free basic valuation fees if a Marsden solicitor is used, along with free legal fees for people looking to remortgage. It also offers free accident, sickness and unemployment cover for the first three months of the loan. However, unlike the Mercantile product there is an arrangement fee of £295 and redemption penalties of 3 per cent of the advance in the first three years, reducing to 2 per cent in year four and 1 per cent in year five.