Northern Rock's 1 year flexi fixed mortgage is a fully flexible mortgage with a fixed rate of 5.99 per cent until November 1, 2002.
It is available to all borrowers for loans of up to 95 per cent of valuation. Borrowers can make overpayments, underpayments and lump sum withdrawals. They can also take payment holidays and interest is calculated on a daily basis.
An early redemption penalty is payable only where borrowers pay off the mortgage in full during the fixed rate period. In this case they would pay 2 per cent of the original advance.
Borrowers can also take out a credit card which is linked to the mortgage rate. This can save the borrower money because mortgage rates tend to be lower than the interest rate applied to conventional credit cards.
According to Moneyfacts on September 5, 2001, this is the only mortgage of its type. Borrowers are going for longer fixed rates while interest rates are so low, especially if they believe there will be no more cuts in the Bank of England base rate.
It is possible to get a flexible mortgage with a longer fixed rate period and a slightly more competitive rate until September 30, 2003 with Alliance & Leicester. This mortgage is available to all borrowers for loans of up to 95 per cent of valuation and if borrowers pay off the mortgage in full, they must pay 6 months' interest as a penalty. This is higher than Northern Rock's.
In terms of flexibility, the mortgages are similar. But a comparison of the lump sum withdrawal facilities shows the minimum withdrawal for Northern Rock, at £1,000, is double the minimum withdrawal with Alliance & Leicester. Alliance & Leicester does not have a credit card facility, but this would not be a problem for borrowers on the whole.