Lenders battle for customers

As lenders compete in a fierce battle for customers, penalties and interest rates are cut as new deals enter the market.

Five year fixed rate deals are being offered at some of the lowest rates for years, while lenders are starting to remove penalties for those who repay more than 10% a year, or repay the mortgage early.

The Coventry Building Society is one of the first to offer a penalty-free deal. The Fixed Flexx mortgage is available for buyers who have a deposit of at least 50%, although it has a set up fee of £499. However, the interest rate is just 1.99%. The lowest interest rate on offer currently, is 1.59% and offered by HSBC.

According to Moneyfacts, the fixed rate deal has huge early redemption fees, which would normally be charged if a borrower repaid more than 10% extra during the year. Some lenders charge a penalty which is a flat rate, while others lower the redemption fees towards the end of the mortgage term.

David Hollingworth, of London & Country, states that a fixed rate mortgage which doesn’t have early redemption fees, is incredibly rare. However, Hollingworth adds that this is useful for buyers who aren’t sure. He also advised that buyers should consider 10 year deals. Some of the deals don’t have an early repayment charge after the first five years.

Mortgage advisors often know which deals are available and which would be suitable for potential buyers, as they have spent time taking a CeMAP training course.


Mortgage Deals

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