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Newbury bypasses flexibility with discount

Newbury Building Society has introduced new deal homebuyer, a five-year discounted rate mortgage that calculates interest on a daily basis.

The mortgage is available for loans of up to 95 per cent of valuation and has a 0.25 discount for the first five years, giving a current payable rate of 5.74 per cent.

It has no early redemption penalties, no arrangement fee and no valuation fee, which makes it more attractive than some similar mortgages.

The daily calculation of interest gives this mortgage a degree of flexibility more often associated with flexible mortgages. However, many lenders such as Principality, Abbey National and Halifax do calculate interest daily on their mortgages regardless of whether they are flexible or not.

According to Moneyfacts on July 19, 2001, the Newbury mortgage has the most competitive rate for mortgages of its type. However, it is possible to get a lower interest rate if the borrowers are willing to accept an early redemption penalty.

Principality has a five-year discounted rate mortgage that has a 0.86 per cent discount until August 31, 2006. This gives a current payable rate of 5.59 per cent and interest is also calculated on a daily basis.

Borrowers get a £250 cashback with this mortgage, but if they redeem in the first five years, the cashback is reclaimed. This is not as steep as some redemption penalties and some borrowers may prefer this to the Newbury mortgage if the lower rate is more important to them than this redemption penalty.

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