Sun Bank has designed fix & flex, a flexible mortgage that allows borrowers to split their repayments between a fixed rate and a variable rate.
The mortgage is available for loans of up to 90 per cent of valuation. Under the fixed rate component, which is stepped over two years, borrowers pay 4.74 per cent until January 1, 2002 and then 5.74 per cent until September 1, 2003. The variable rate part is currently 6.24 per cent.
If borrowers redeem the fixed rate component in the first two years, they must pay five per cent of the advance. They can make underpayments, overpayments, take payment holidays and make lump sum withdrawals, while interest is calculated daily.
According to Moneyfacts on May 25, 2001, Standard Life Bank offers a similar mortgage called freestyle plus. It is available for loans of up to 90 per cent of valuation and allows borrowers to split repayments between a 1.76 per cent discount for six months giving a payable rate of 4.49 per cent and a two-year fixed rate at 5.99 per cent.
Borrowers who redeem in the first year must pay three months' interest on the discounted part of the loan and it has the same flexible features that Sun Bank offers.
The Sun Bank mortgage is not as competitive as the Standard Life mortgage because it has higher interest rates, has an arrangement fee whereas Standard Life Bank does not and its tie-in period is twice as long as Standard Life's.