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Newcastle semi-exclusive fix has no ERC

Newcastle Building Society has introduced a semi-exclusive two-year fixed-rate mortgage that has no early redemption charges if the loan is repaid in the fixed-rate period.

The deal is available for loans up to 80 per cent of valuation and is fixed at 4.09 per cent until April 30, 2014.

The maximum loan at 80 per cent of valuation is £350,000 but this increases to £500,000 for a maximum LTV of 75 per cent. The total arrangement fee is £995, comprising a completion fee of £800 and a £195 reservation fee. One potential drawback is that it is available direct or through selected distributors such as L&G and Pink Home Loans, not the broader intermediary market.

Defaqto insight analyst for banking David Black says: “There are four fixed-rate mortgages available that do not have an early repayment charge and three of them are for two-year fixed rates offering a maximum LTV of 80 per cent. The 131 two-year fixed rate mortgages available which specify a maximum LTV of 80 per cent currently charge an average rate of 4.08 per cent and a fee of £701.

“Two years is not a particularly long period and the question is whether it is worth paying a higher rate for the flexibility of not having an early repayment charge or going for a lower rate with an ERC during the two year fixed-rate term. I have little doubt that the vast majority of borrowers would plump for the lower rate. It could be a closer call if the fixed-rate period was considerably longer.”

Black points out that Market Harborough has a direct-only two-year fix at 3.2 per cent which does have an ERC and says most people would not need long to consider which of the two mortgages to choose. The Market Harborough deal has a lower fee than Newcastle at £495, plus a valuation incentive and a legal fee incentive for remortgages.

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