Portman Building Society has introduced a two-year fixed rate mortgage which is fixed at 5.19 per cent until October 1, 2003.
The mortgage is available to all borrowers for loans of up to 95 per cent of valuation and has an arrangement fee of £300. Borrowers who pay the mortgage off during the fixed rate period must pay 3 per cent of the amount repaid as an early redemption penalty.
Two-year fixed rate mortgages may be a good option for borrowers who want short term security. The fourth cut in the Bank of England base rate to 5 per cent this year may have convinced some borrowers that fixed rates are not going to get any lower. Those remortgaging may be looking for a fixed rate now, before interest rates start to increase.
According to Moneyfacts on August 21, 2001, the Portman Building Society mortgage has the most competitive interest rate for deals of this type. Britannia Building Society also has a two-year fixed rate mortgage for all borrowers up to 95 per cent of valuation, but this has a higher interest rate, fixed at 5.34 per cent for the first two years.
Britannia Building Society offers free unemployment only insurance for the first year as an incentive to take out the mortgage and it also has a slightly lower arrangement fee that the Portman mortgage at £295.
But Portman and Britannia calculate the early redemption penalty differently. Borrowers with a £100,000 repayment mortgage with Britannia will pay 180 days' interest or £3,274.52. In the first two years, those with a £100,000 repayment mortgage with Portman pay £3,000.