Bonus for loyal home buyers

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IN A new twist to the discount mortgage war, Allied Dunbar and Citibank have launched a Loyalty Payment Mortgage that offers to cut the balance outstanding on repayment mortgages by 5 per cent after five years, and every five years thereafter until redemption, writes Rachel Halliburton.

For a typical £50,000 mortgage over 25 years, the bonuses could help borrowers pay off their mortgages three years and 10 months early.

At current interest rates, the saving in combined capital and interest could roll up to £18,000, more than a third of the sum initially borrowed.

Andy Young, assistant director of Allied Dunbar's Mortgage Marketing Division, sees the Loyalty Payment Mortgage as "the perfect solution in an economic climate where demand for repayment mortgages is rising, with many borrowers now looking to pay off their mortgages as quickly as possible".

Mortgages up to £100,000, based on up to 95 per cent of the valuation of the property, and up to £250,000 on 90 per cent of the valuations, are available, both as new loans and remortgages. Clients will have to pay an arrangement fee of £250, but there is a £350 cash-back bonus on completion.