Home owners helped to secure a quick fix

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The Independent Online
House buyers hoping to find the best mortgage deals are increasingly being tempted by a range of long-term bargains on offer from lenders.

Brokers negotiating the deals say they represent the best chance for borrowers to tie themselves into a cheap mortgage before rates begin to rise again.

But they also claim that the demand for long-term fixed mortgages is driven by borrowers themselves seeking security for four- and five-year periods.

Chris Scales, head of development at Mortgage Intelligence, which offers a range of mortgage products via 400 independent brokers across the country, says: "We do not create mortgage deals without a lot of research first. We are in constant contact with our brokers and they tell us what the demand is from their customers so that we can tailor our products accordingly."

Mr Scales says the main impetus for the new demand comes from borrowers who believe the current interest rate cycle is close to or at its lowest point and will inevitably rise. The uncertainties created by the forthcoming general election are an additional factor driving demand.

But he adds: "To some extent there are two different types of borrower. There is always the first-time buyer who wants to pay as little as possible at the beginning of a mortgage and is after a large discount off the variable rate for just one or two years."

Mortgage Intelligence is offering a four-year mortgage pegged at 6.99 per cent for loans of up to 90 per cent of a home's value. This rise to 7.29 per cent for a loan-to-value of 95 per cent. The arrangement fee is pounds 275.

Ian Darby, a director at John Charcol, a large independent mortgage broker, agrees: "Aside from what is happening here, there is the perception that the outcome of the US presidential election may lead to higher interest rates. Also, the belief that a rise in rates is more likely if Britain becomes part of a single European currency."

John Charcol last week launched a new five-year deal, pegged at a psychologically important 6.99 per cent, which the company claims is the cheapest currently available. However, the mortgage carries a completion fee of pounds 700, higher than any other lender, which is added to the loan. Mr Darby argues: "We are aware that this is a lot of money. But it is only about pounds 400 higher than most other fees.

"Secondly, if you look at the cheapest five-year offers on the market, ours is the better deal. Britannia charges 7.74 per cent, while Northern Rock has a five-year mortgage at 7.49 per cent but ties it in with expensive buildings and contents insurance. On a pounds 70,000 mortgage, we save more than pounds 2,600 over five years compared with Britannia. After our fee is taken into account, we are still pounds 2,200 cheaper."

Mr Darby says a growing request from some borrowers is for mortgages with few penalties for switching, particularly where partial repayment of capital is made.

John Charcol offers a 4.99 per cent fix until August 1998, which allows partial repayment of up to 15 per cent of capital without payment. Alternatively, there is a 2 per cent discount off the variable rate of 6.99 per cent, while allowing repayment of 25 per cent of the loan.

For borrowers who prefer to fix over a shorter period, Chase De Vere Mortgage Management, another mortgage broker, has packaged a three-year deal pegged at 5.99 per cent. Benefits include fixed-rate conveyancing on re-mortgages, using a nominated solicitor, or a pounds 195 contribution for buyers. There is a pounds 295 fee.

FirstMortgage, a telephone lender which offers both its own range of mortgages and also selects some of the best deals from other lenders, is offering a three-year discounted variable-rate mortgage which currently charges 4.24 per cent until October 1999, a drop of 2.75 per cent off its variable rate. Mark Chilton, marketing director at FirstMortgage, says: "We find that over the shorter term, customers do not differentiate hugely between fixed and discounted rates. What they are looking for is a good cut-price deal."

o Mortgage Intelligence 0800 246000; Chase de Vere Mortgage Management 0171 930 7242; FirstMortgage 0800 080088; John Charcol 0800 718191.