Cardiff-based Principality Mortgages new three-year fixed rate mortgage is available to all borrowers.
The mortgage, which is fully portable, has a fixed rate of 5.89 per cent until November 30, 2004. The maximum loan to value for first-time buyers is 95 per cent, with remortgages restricted to a maximum valuation of 90 per cent.
Principality will refund valuation fees if its own valuers are used and the mortgage has no arrangement fee. But there is compulsory buildings and contents insurance, and an early redemption penalty of two per cent of the advance until the end of the fixed rate period.
The most competitive three-year fixed rate mortgage currently available is from Darlington Building Society. According to Moneyfacts, on August 21, 2001 this has a fixed rate of 5.19 per cent up to a maximum valuation of 90 per cent. Like the Principality product it has compulsory buildings and contents insurance, but it is not portable and has an arrangement fee of £199. The redemption penalty is also higher at six months interest during the fixed rate period.
Examining the costs involved in these mortgages, the Principality product will have monthly repayments of £637.59 and the Darlington mortgage £602.58. Should the mortgages be redeemed in the first year, the penalty on the Principality mortgage will be £2,045 and on the Darlington mortgage £3,335. Although it has a higher rate, the Principality product is more attractive because its other fees are lower.
But a borrower who goes for the Principality mortgage must be aware that the buildings and contents insurance is compulsory and there may be better deals available if they shop around. Someone who goes for the Principality product might decide that they could put up with a higher interest rate if it means lower redemption penalties.