Northern Rock has introduced a flexible mortgage that tracks the Bank of England base rate for five years.
The mortgage is part of the together range and is available for loans of up to 95 per cent of valuation. The interest rate is currently 6.89 and is guaranteed not to be more than 1.5 per cent above the base rate until January 1, 2005.
Overpayments, underpayments, payment holidays and lump sum withdrawals are offered and interest is calculated on a daily basis. There are no early redemption penalties and mortgage payment protection insurance is free for the first six months.
According to Moneyfacts on April 9, 2001, there are no exact comparisons to the Northern Rock mortgage. The closest competitor is a flexible base rate tracker from The Mortgage Business, Like the Northern Rock mortgage it is available for loans of 95 per cent and has the same degree of flexibility, including daily interest. It is guaranteed not to be more than 1.49 per cent above the base rate for the mortgage term.
The Mortgage Business mortgage may be more competitive than the Northern Rock mortgage because any cut in the base rate will immediately be passed on to borrowers for the life of the loan. The Northern Rock mortgage reverts to the standard variable rate after five years and the building society would not necessarily pass on base rate cuts straight away.