Skipton Building Society has introduced a 5-year flexible capped-rate mortgage which also has a discount.
The mortgage is available for loans of up to 85 per cent of valuation and the rate is capped at 6.50 per cent until January 31, 2007. There is also a 0.60 per cent discount in the first two years, giving a current payable rate of 6.05 per cent. A 0.30 per cent discount is offered in years 3 and 4, and a 0.50 per cent discount is offered in year five as part of Skipton's mortgage discount scheme.
Flexible benefits include overpayments, payment holidays and the daily calculation of interest, but borrowers cannot make underpayments and lump sum withdrawals. If the mortgage is paid off early, borrowers must pay 5 per cent of the loan in year one, which decreases by 1 per cent each year until 1 per cent in year five.
This mortgage could attract borrowers who want some flexibility and a discount, but who also want to ensure their repayments will not increase dramatically if interest rates start to rise again.
According to Moneyfacts on September 4, 2001, it is the only mortgage of its type. However, Northern Rock offers a lower five-year capped rate, even taking Skipton's discount into account. It differs in that it is available for loans of up to 90 per cent of valuation
As well as being more competitive, the Northern Rock mortgage goes further than Skipton in terms of flexibility as it offers underpayments, lump sum withdrawals and a credit card facility in addition to the features Skipton offers.
Borrowers who pay the Northern Rock mortgage off early are subject to a flat penalty of 2 per cent of the loan, which is lower than the Skipton mortgage in the first three years, but higher in year five.