Yorkshire rollover deal is 'welcome'
Yorkshire Building Society has launched a rollover fixed-rate mortgage for borrowers coming to the end of their home-loan deal.
The rate is fixed for one year, at the end of which the customer has three choices: fix for a further 12 months with Yorkshire at the prevailing rate, switch to the society's standard variable rate or remortgage away with no penalty. This arrangement continues until the borrower has either repaid the loan or moves to another lender.
Mortgage brokers have welcomed the innovation by the mutual, run by Iain Cornish, and say it could trigger other lenders to offer similar products.
Innovation: Yorkshire chief executive Iain Cornish
It is difficult for borrowers with a mortgage of £25,000 or less to switch lenders.
'Most lenders have a minimum loan size for a remortgage of £25,000, but unless they are paying a high rate, most borrowers will not bother to remortgage,' says Ray Boulger, senior technical manager at broker John Charcol in central London.
'For those who do want to remortgage, there is a way around the restriction. Borrowers can remortgage for £25,001 onto a deal that allows unlimited penalty-free overpayments and then immediately overpay the amount not required on their loan.'
The minimum loan size on the YBS deal is £25,000. The rate is fixed at 2.69 per cent and there is a £495 arrangement fee. It is available to those who need to borrow only 35 per cent of their property's value.
The product carries a one per cent penalty charge if the borrower wants to leave during the fixed-rate period. There is also free legal work, a free valuation and free buildings and home contents insurance for one year.
Matthew Fleming-Duffy, director at brokerage-Abacus Financial in central London, says it is a good deal.
'It represents one of the most competitively priced fixed rates available,' he says. 'The only downside is that the fixed rate is short term.'
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