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Pink brings in long redemption fee

Pink Homes Loans is hoping to undercut the opposition with the exclusive buy-to-let mortgage, funded by Mortgage Express.

The mortgage is fixed at 1.99 per cent until December 3, 2002, after which the rate will be 1.75 per cent above the Bank of England base rate for the term of the loan. It is available for loans of up to 80 per cent of property valuation.

Borrowers can use the mortgage to buy any number of properties, up to a total of £300,000. However, properties within the M25 valued at less than £70,000 are excluded because Mortgage Express feels that properties below this value would not have very good rental prospects. The Land Registry estimates the average property price in Greater London is £216,210.

The mortgage has a redemption penalty of six months’ interest until December 3, 2006, four years after the fixed-rate period has ended which is inflexible. The buy-to-let market requires a long-term approach, but once the initial rate is finished this mortgage is similar to those offered by its competitors. Six out of the 11 competing mortgages charge 1.75 per cent above the base rate, but the competitors have shorter redemption penalties, most running until 2004.

According to Business Moneyfacts, on November 20, 2001, this is the lowest initial rate for a one-year fixed-rate buy-to-let mortgage. The next lowest is from the Mortgage Operation, which is set at 2.99 per cent until December 3, 2002 for loans of up to 80 per cent. Like the Pink Home Loans mortgage the rate changes to 1.75 per cent above the base rate after the fixed-rate period and is also funded by Mortgage Express, so it has the same restrictions on properties in the M25 boundary.

The Mortgage Operation product has a more favourable redemption penalty of six months’ interest until December 3, 2004 and it can be used to buy any number of properties up to £1m.

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