Alliance & Leicester has introduced its flexible base rate tracker mortgage that has no arrangement fee or redemption penalties.
The mortgage is available for loans of up to 95 per cent of valuation and has an interest rate of 5.74 per cent for the first year. It then remains at 0.95 per cent above the Bank of England base rate for the next 10 years.
Borrowers can make overpayments, underpayments, take payment holidays and make lump sum withdrawals of at least £500. Interest is calculated on a monthly basis.
According to Moneyfacts on March 20, 2001, the Alliance & Leicester mortgage is the cheapest mortgage of its type. The closest competitor is from Pink Home Loans with an interest rate of 5.99 per cent for the first year. It then remains at 0.99 per cent above the Bank of England base rate for the mortgage term.
Like the Alliance & Leicester mortgage, the Pink Home Loans mortgage has no redemption penalties and is available for loans up to 95 per cent of valuation. However, its flexibility is severely limited compared to the Alliance & Leicester mortgage as it only allows underpayments, although interest is calculated daily.