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Sun Bank leaps whilst rates are low

Specialist mortgage lender Sun Bank has taken advantage of the recent fall in interest rates to expand its range of fixed-rate mortgages.

Its new mortgage has a three-year fixed rate of 5.74 per cent for loans of up to 75 per cent of the property value until November 1, 2004. It is available for both first-time buyers and people looking to remortgage.

There is an arrangement fee of £395 and if the mortgage is redeemed within the fixed-rate period then the borrower will face a redemption penalty of 5 per cent of the advance.

This is not the most competitive three-year fixed-rate mortgage on the market. According to Moneyfacts on September 24, 2001, the lowest rate mortgage is from Derbyshire Building Society, which has a mortgage fixed at 5.19 per cent for loans of up to 75 per cent of valuation until October 31, 2004.

This has three features that makes it more competitive than the Sun Bank product, apart from its lower rate. Firstly it has a lower arrangement fee of £295, secondly it has a redemption penalty of 3 per cent of the advance in year one, 2 per cent in year two and 1 per cent in year three. Finally it offers a refund of basic valuation fees if the society’s valuation experts are used.

Looking at the mortgage market, we see that it has been continuing to grow in 2001. Total gross advances in the market during the first quarter came to £30.9bn, not far from the £30.8bn in the fourth quarter of 2000. However, by the second quarter of 2001 this had jumped to £39.9bn, as the market was fuelled by cuts in interest rates by the Bank of England.

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