Derbyshire Building Society has introduced a three-year fixed rate mortgage that is available to all borrowers for loans of up to 90 per cent of valuation.
The mortgage is fixed at 5.75 per cent until September 30, 2004. Borrowers who pay off the mortgage during the fixed rate period must pay an early redemption penalty that reduces by 1 per cent each year from 3 per cent in year one to one per cent in year three. There is no mortgage indemnity premium payable, but there is an arrangement fee of £225.
According to Moneyfacts on July 31, 2001, borrowers can get a more competitive deal from Darlington Building Society. It has a three-year fixed rate mortgage at 5.19 per cent for loans of up to 90 per cent of valuation and borrowers who redeem early must pay 6 months' interest during the fixed rate period.
Despite its competitive rate, the main drawback of the Darlington mortgage is that mortgage indemnity premiums are charged for loans above 80 per cent of valuation. The premium rate for this is 5.49 per cent for loans from 80 per cent to 85 per cent of valuation and 7.04 per cent for loans from 85.1 per cent to 90 per cent of valuation.
Borrowers with a 90 per cent mortgage on a property worth £100,000 would pay an extra £1,056 as a mortgage indemnity premium with Darlington but they would not have to pay this fee with the Derbyshire mortgage.