Scarborough Building Society has brought in the two step five-year discount mortgage.
Aimed at all borrowers, the mortgage has an initial discount of 2.25 per cent in the first year for loans of up to 95 per cent of valuation. This gives it a payable rate of 4.74 per cent. For the next four years it has a discount of 0.74 per cent.
The valuation fee will be refunded on completion and there are no arrangement fees or compulsory insurances. The redemption penalty is 5.21 per cent of the advance during the discounted period.
Discounted rate mortgages tend to be popular with borrowers who feel that interest rates will continue to fall over the long term, but interest rates are now at their lowest level since September 1999 and it is uncertain if any further cuts will be made.
According to Moneyfacts the most competitive five-year stepped rate discount mortgage is from Principality Building Society. This has a 2.66 per cent discount in the first year of the mortgage, giving it a payable rate of 3.79 per cent for loans of up to 75 per cent of valuation. This is followed by a 1.66 per cent discount in the second year of the mortgage and 0.66 per cent discount for the next three years. However the mortgage comes with compulsory buildings and contents insurance and a redemption penalty of three per cent of the advance for the discounted period.
Based on a £100,000 mortgage London & Country Mortgages says that monthly payments for the Scarborough mortgage would be £569.54. In contrast the Principality mortgage would cost £516.31 a month.