Norwich & Peterborough has introduced a five-year fixed-rate mortgage that is available for loans of up to 95 per cent of valuation.
This mortgage is fixed at 5.94 per cent for five years and has an arrangement fee of £295. If borrowers pay off the mortgage during the first five years, they must pay six months' interest as an early redemption penalty. However, they can overpay by up to 10 per cent a year without incurring this penalty.
According to Moneyfacts on October 11, 2001, Bank of Ireland Mortgages has a more competitive five-year fixed-rate deal for loans of up to 95 per cent of valuation.
This mortgage is fixed at 5.39 per cent until October 1, 2006 and at £280, its arrangement fee is lower than the Norwich & Peterborough's. However, borrowers who take out the Bank of Ireland Mortgages product will pay a higher early redemption penalty than with Norwich & Peterborough if they pay the mortgage off during the fixed-rate period. The penalty is 7 per cent of the sum repaid in year one, 6 per cent in years two and three, then 5 per cent in years four and five.
Despite its more competitive fixed-rate, Bank of Ireland Mortgages also compares unfavourably to Norwich & Peterborough in terms of the mortgage indemnity guarantee (MIG) charged on higher loans. Borrowers with loans above 90 per cent of valuation are charged a MIG at the rate of 8 per cent with Norwich & Peterborough. In comparison, Bank of Ireland Mortgages charges a MIG on loans above 85 per cent at the rate of 8.95 per cent.