Bradford & Bingley helps ease payment shock

* 100,0001 Borrowers coming to the end of their cheap 2-year fixed rate deal could be paying thousands of pounds a year more unless they take action

* 4.89% three-year fixed rate

* 5.15% three-year capped rate

Bradford & Bingley estimates that some 100,000 borrowers will be in for a payment shock this Spring as they approach the end of their cheap two-year fixed rate deals, some may jump from rates as low as 3.3% to as much as 7%.

To help soften the impact Bradford & Bingley has launched two new market-leading products designed specifically for borrowers looking to continue protecting their mortgage payment. The first, a three year fixed rate deal, funded by Bristol & West, has a rate of 4.89% (6.7%) and also comes with free legals and a free valuation. The second, a three-year capped rate, funded by Coventry Building Society, has an initial pay rate of 5.15% (5.9% APR), and is then capped at 5.15%, it also comes with legals fee assist and a free valuation.

David Bitner, head of mortgages for Bradford & Bingley, comments: "With several interest rates rises last year, borrowers nearing the end of their fixed rate deals taken in 2003 are in for a payment shock. Rates have risen on all deals and many lenders’ standard variable rates are edging up to 7% leaving many borrowers wondering what they should do now. To help cushion the blow we have designed two market-leading three-year products. A fixed rate for those borrowers who think interest rates may rise and a capped rate for borrowers who think rates may fall."


Three-year Fixed Rate Deal

* 4.89% (6.7% APR) fixed until 31/03/2008

* Free valuation and free legals for remortgagers

* Max LTV: 95%

* Redemption penalties only apply in first three years

* No HLC

Three-year Capped Rate Deal

* Initial pay rate 5.15% (5.9% APR). Capped at 5.15% until 31/03/2008

* Free valuation and free legals for remortgagers

* Max LTV: 95%

* Redemption penalties only apply in first three years

* Can overpay 5% per annum ERC free

Borrowers, for instance, who took out Britannia’s two-year fixed rate deal at 3.29% in March 2003 - a best buy at the time - on a £100k mortgage will be paying currently £494.16 on a repayment basis; £274.17 on an interest-only basis. When this comes to an end in March 2005 their payments are going to soar considerably, especially if they stay on Britannia’s standard variable rate, currently 6.35%. Their interest costs would almost double in fact! On a £100k mortgage over 25 years borrowers would pay £673.73 per month on a repayment basis and £529.17 on an interest-only basis. That’s over £2,150 or £3,060 a year extra to find.

Bitner continues: "Many borrowers will be unaware their mortgage payments are going to soar when they come off their cheap two-year fixes. It’s vital, therefore, that people in this position start planning now in order to avoid this potentially significant increase in their mortgage costs. Rates are quite a lot higher than they were two years ago but this makes it even more essential for people to remortgage onto a competitive deal and keep their repayments as low as possible. We have designed these two fantastic three-year products to meet the needs of those borrowers looking for rate protection but also offer some highly competitive discounted and tracker rates to suit all through our branch based mortgage broking service."