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Lender says...

Skipton Building Society has lauched two five-year fixed rate mortgage products known as Stepping Up and Stepping Down.

Stepping Up has a rate that starts at 5.39 per cent and increases annually. The product is aimed at borrowers who may find standard fixed rate products initially too expensive but know their income is going to increase in the future, such as graduates.

In the first year the rate is fixed at 5.39 per cent until 31 October 2009. This increases to 5.79 per cent until 31 October 2010, to 6.19 per cent until 31 October 2011, to 6.59 per cent until 31 October 2012 and then 6.99 per cent until 31 October 2013.

The second product, known as Stepping Down, reverses the rate movement with a greater initial rate reducing each year. 

Steve Aldous, general manager of sales and marketing for Skipton, said this deal would suit borrowers who are currently financially well-placed but may be planning life changes that require lower outgoings, such as retirement.

In the first year the rate is fixed at 6.99 per cent until 31 October 2009, decreases to 6.59 per cent until 31 October 2010, then down to 6.19 per cent until 31 October 2011, down to 5.79 per cent until 31 October 2012, then remains on 5.39 per cent for the fifth year of the deal.

Both products are available up to 75 per cent loan-to-value for a completion fee of £895.

Both deals revert to the standard variable rate, currently at 6.70 per cent, when the term period lapses.

When taken as remortgage deals these products also offer free legal fees and valuation.

Mr Aldous said: "Whether you are looking to get on the housing ladder and need to keep you costs low or are planning ahead for a time when your budget will be tighter, we now have the mortgage products to help."

Adviser says...

Danny Lovey, proprietor of Essex-based The Mortgage Practitioner, said he thought neither product was suitable for the customer group Skipton claimed they were aimed at.

He said: "The first product is quite limiting. I do not know many graduates who have a 25 per cent deposit. Most graduates are struggling to pay off their student loan.

"As for the other one I would think it is quite dangerous, unless it is the last five years of someone's mortgage, because it goes on to the standard variable rate after that."

Rating: 3/5 stars