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First Direct launches cheapest five-year mortgage deal

Lenders are competing to attract customers following the launch of the Bank of England's Funding for Lending scheme.


by Michelle McGagh on Feb 08, 2013 at 09:46

First Direct launches cheapest five-year mortgage deal

First Direct has launched the lowest ever five-year fixed rate mortgage as lenders compete to win business.

The five-year deal has an interest rate of just 2.69% and is offered to borrowers with 35% deposit or equity. The rate has a £1,999 booking fee, which is quite high although the deal is the lowest rate on the market.

For those with a larger mortgage paying a more expensive booking fee could work out as beneficial in the long-term as the low rate could shave thousands of pounds in interest repayment off of the mortgage. For those with a smaller mortgage, the benefits of a low rate but high booking fee may not work out as well.

Andy Forbes, head of retail products at First Direct, said more borrowers were looking to lock in to a longer-term deal.

‘Over the last month we have seen borrower appetites increase for longer term fixed rate mortgage deals. In response to this demand we have reviewed our offers to ensure that we continue to give our customers access to the most competitive rates available,’ he said.

First Direct is also offering shorter-term fixed rate deals and trackers. It has two two-year fixed rate deals on offer, one a rate of 2.19% with a £1,999 booking fee and another at 2.49% with a £999 booking fee.

A 2.38% life tracker with a £1,699 fee and a 2.54% life tracker with a £999 fee are also being offered. All deals are available to those with a 35% stake in their home or deposit.

Lenders are pricing their mortgage deal competitively following the introduction of the Funding for Lending scheme. The government initiative saw £80 billion made available to lenders who have to lend to those taking out mortgages.

The more money the lenders lend out the better the rate they receive from the government so mortgage deals are being priced competitively to attract customers. The scheme started in August last year and will run for 18 months or until the £80 billion is loaned out.

4 comments so far. Why not have your say?

David Chapman

Feb 08, 2013 at 16:08

It's all very well offering a cheap government funded mortgage - but look at the fees !!! - they are outrageous !!! - sheer profiteering at the expense of first time buyers - these lenders [and others] should be ashamed of themselves.

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Alan Tonks

Feb 08, 2013 at 18:31

I think you mean, until this Government find another way of propping the housing market up.

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Feb 09, 2013 at 13:20

The problem with the economics of is country , is they're broken and have failed. To out it simply, government handouts have created an unsustainable living , allowed employers to keep costs down, which is good, but at a cost. This cost can be seen clearly through the benfits they hand out.

There's simething wrong with society, this country and its system, if people who work need top ups. Long ago you didn't need anything unless you were out of work, Or if you did it was little. Today, they've meddled with every part of the free market, propping rents, house prices, standard of living up. We could have had a situation where all these things could have corrected themselves 6 years ago , instead, its all artificial through working tax credits and other benefits. On top of this inflation has been running probably 7% a year not 2%, so those trying to earn a decent living are seeing a salary which was decent, seem poor.

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leslie whicker

Feb 09, 2013 at 14:00

This is not the cheapest rate as the Yorkshire bs offers a 1.99 rate

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