Staffordshire Building Society has introduced the three-year discounted mortgage.
The mortgage has a discount of 1.5 per cent in the first three years for loans of up to a maximum of 75 per cent of valuation. This gives it a payable rate of 5.24 per cent.
Borrowers have several options to choose from. They can either take £350 cashback or they can go for Staffordshire's fastrack remortgage service. This is a guarantee that in the event that they remortgage, the society will process the claim within seven working days.
The mortgage also comes with free buildings and contents insurance for the first year of the mortgage, while the Staffordshire will also pay basic valuation fees if its own valuers are used. The redemption penalty is five per cent of the advance in the first two years and four per cent in the third year.
The housing market remains buoyant despite fears of a recession. Low interest rates have encouraged more people to go for discounted and variable rate mortgages instead of fixed rate mortgages. The latest figures from the Council of Mortgage Lenders show that total gross mortgage lending in the UK rose from £13.6bn in May 2001 to £15bn in June 2001. In the second quarter of 2001, 70 per cent of all mortgages were variable rate, which includes discounted mortgages, while 30 per cent were fixed rate.
According to Moneyfacts the most competitive three-year discounted rate mortgage for loans of up to 75 per cent of valuation is from Nottingham Building Society. This has a discount of 1.7 per cent, giving it a payable rate of 5.04 per cent. This mortgage offers free valuation fees if the Nottingham's valuers are used but the redemption penalty is the reclamation of the discount during the discount period. But remortgages are limited to properties in London, the home counties, South Yorkshire, Lincolnshire and the East Midlands.