Principality has introduced a five-year discount mortgage called discount option 5.
Borrowers will pay an initial rate of 5.59 per cent, which includes a 0.86 per cent discount, until August 31, 2006.
The mortgage is available for loans of up to 95 per cent of valuation and remortgages of up to 90 per cent of valuation. Borrowers also receive a £250 cashback, which must be repaid if the mortgage is redeemed during the five-year discount period.
Figures from the Council of Mortgage Lenders show that mortgage lending is now at the highest level since its records began in June 1998. Total gross mortgage lending rose from £9.2 bn in April 2000 to £12.6bn in April this year. The recent series of cuts in the Bank of England base rate has increased competition among lenders and this could account for the high levels of mortgage activity.
According to Moneyfacts on May 29, 2001, the Principality mortgage is the second most competitive mortgage of its type in terms of payable rate. The most competitive rate is from the Nottingham Building Society, which has a 1.40 per cent discount over five years and a payable rate of 5.34 per cent. However, the early redemption penalty of claiming back the discount is higher than that of the Principality mortgage.