The Woolwich has launched a new one year tracker mortgage that has currently the lowest interest rate at just 1.98 percent, undercutting HSBC’s lowest 1.99 percent interest rate, yet Credit Choices and one or two other media sources have noted the ‘sting in the tail’ accompanying this mortgage.

Woolwich is owned by Barclays and stands as one of the largest mortgage lenders in the country. This new initial rate might be incredibly low but mortgage advisors would warn their clients that the true cost of the overall mortgage is much higher.

The 1.98 percent is a discounted rate of +1.48% over the Barclays base rate. However, as with many other discounted rate mortgages it only lasts for a set period, in this case one year. After that year, it then reverts to Barclays base interest rate +2.49%.

There is what is called a overhang period of two years, meaning that for two years after the discounted rate ends, borrowers who want to switch products or to another lender would have to pay an early repayment charge of 2%. So, if after the one year period you had £200,000 outstanding, you would have to pay a £4,000 fee to leave. To qualify for this mortgage, your loan must be at least £200,000.

Those taking their CeMAP course will learn about overhang periods, early redemption charges and all the mortgage jargon before taking their CeMAP exam.

Customers considering this Woolwich deal should do their homework carefully and be sure that if the base rate rises, they could still afford their mortgage repayments.

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