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Stroud & Swindon drop-lock loan to offer penalty-free fix

Stroud & Swindon Building Society’s intermediary arm ITL Mortgages is planning to offer a product that allows borrowers to switch to a fixed rate at any time without a penalty charge.

The drop-lock deal would allow clients to switch from a tracker or to a fixed rate at any time during the contract.

The firm is still deciding whether the deal will be available to the whole of the intermediary market or to selected distributors.

Sales and marketing director Linda Will says the drop-lock mortgage puts the client in control and gives them options when the base rate eventually rises.

She says: “The idea is to give people a series of products that have built-in options. If everybody thinks interest rates are going to start climbing within a year, these products will give you an option of switching to a fixed rate but they do allow you to continue to enjoy the benefits of lower interest rates in the short term.”

John Charcol senior technical manager Ray Boulger says: “I think it is the right time to be looking at drop-locks because it is very difficult to know when interest rates will go up.My gut feeling would be it will probably be right to stay on a tracker rate for quite some time but things can change very quickly.”

Money Marketing understands a number of other lenders are considering offering drop-lock loans in the near future.

Nationwide currently offers a switch and fix deal which allows borrowers to switch from a tracker to fixed deal without early repayment charges.

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