Northern Rock is getting flexible with the introduction of the together connections mortgage, one of the small number of flexible mortgages that come with additional features.
The mortgage will track the Bank of England base rate for the first four years of the loan and is guaranteed not to be more than 1.5 per cent above it, giving it a starting rate of 5.89 per cent for loans of up to 95 per cent of valuation. It is aimed at first time homebuyers and people looking to remortgage their properties, who are also looking for a product with additional features.
Borrowers can take out any combination of a personal loan, credit card, savings account or current account. These will be separate from the mortgage and will all be at the same rate as the mortgage. It is also fully flexible and offers overpayments, underpayments, lump sum withdrawals, payment holidays and daily interest.
This type of mortgage is different from current account mortgages in that instead of combining all the elements in one account, the accounts are kept separate. There are only two other similar products available on the market, from Intelligent Finance and the Woolwich.
Looking at some of the other products available, according to Moneyfacts on May 8, 2001 the Northern Rock mortgage is the only four-year variable rate tracker mortgage on the market. Its nearest competitor is the tracker mortgage from the Woolwich. This has an interest rate guaranteed to be no more than 0.75 per cent above the Bank of England base rate. It offers underpayments, overpayments, payment holidays and daily interest and also offers access to a separate current account, credit card, and savings account at the same rate of interest as the mortgage. However, unlike the Northern Rock mortgage there is no access to a loan facility and there is no lump sum withdrawal.
According to the 2000 annual mortgage report from the Council of Mortgage Lenders, only six per cent of flexible mortgage holders have used the payment holiday facility.