Fixed rate loans still look a good bet

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The Independent Online
LENDERS are competing fiercely on discounted and cash-back loans now the demand for fixed rates has risen. But fixed still look like a good deal as rates are more likely to rise than fall much further.

Discount deals are tied to the size of the loan and of the deposit. Abbey National is offering discounts until August 1995 which relate to the size of the deposit. Those with a 5 to 10 per cent deposit get a 3.75 per cent discount, 10 to 40 per deposits get 4 per cent and 40 per cent deposits 4.55 per cent.

These come on top of the discounts for larger loans. A loan up to pounds 60,000 is 7.74 per cent, pounds 60,000 to pounds 100,000 is 7.64 per cent and larger loans 7.54 per cent.

This means that someone borrowing a large amount with a large deposit will pay just 2.99 per cent initially. Even with a minimum 5 per cent deposit of 5 per cent on a pounds 30,000 loan, the rate comes down to 3.99 per cent.

National Westminster Bank, for instance, gives a 2 per cent discount on loans from pounds 15,000 to pounds 59,999 for 12 months, 2.5 per cent up to pounds 120,000 and 2.75 per cent on larger loans.

The discounted rate for those with at least 25 per cent for a deposit is 5.74 per cent, while others pay 6.24 per cent.

Northern Rock has fixed rate mortgages with 1 per cent discounts until April next year. The three-year loan is at a full rate of 7.59 per cent, four years at 7.99 per cent and five years at 7.49 per cent.

Nationwide has increased the rates of its fixed loans by an average of 0.4 of a percentage point. But the five-year fix goes from 8.59 or 8.79 per cent depending on the size of deposit to 9.09 or 9.29 per cent.

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