Scottish Widows unveils five-year fixes

The lender is offering an interest rate of 1.74 per cent up to 50 per cent loan-to-value (LTV) and 1.84 per cent to 60 per cent LTV, both with a £749 fee.

Eligible mortgage applications must be fully packaged and at offer stage by 30 November and completed no later than 22 December.

Scottish Widows mortgages have an offset facility, which allows borrowers to set up a savings account to reduce the payments on their mortgage interest.

Offsetting means the interest is charged on the mortgage balance minus the savings balance, potentially saving thousands of pounds in repayments.

The lender’s move follows the decision by the Bank of England’s Monetary Policy Committee to raise interest rates from their historic low of 0.25 per cent to 0.5 per cent on 2 November.

Data from conveyancing service provider LMS shows the number of people remortgaging on to five-year fixes reached a record high in September, with more than two-fifths opting for such deals.

Martin Fleming, managing director of Scottish Widows Bank, said: “We have seen a strong trend of our customers opting for longer term fixes in recent months and this has also been reflected across the market.

“Following the Bank of England base rate rise, there is an opportunity for advisers to provide certainty around mortgage payments for their clients in a period of change.

“By remortgaging to a Scottish Widows Bank offset product, brokers can offer their clients the ability to access competitive mortgage rates, reduce the balance they pay interest on with savings and have instant access to that cash should their circumstances change.”

Kevin Dunn, mortgage and protection adviser at Leicestershire-based Furnley House, said: “They are very competitive products. We have seen a few lenders since the Bank of England put the base rate up choosing to make a stand.

"Accord dropped their standard variable rate, and this is another one.

“We keep getting asked by clients what we think about the interest rate rise. There are not going to be massive changes, but swap rates are going up slightly and fixed rates will go up, I expect.

“Scottish Widows are a really decent lender, and you can use an offset facility on these products, so if you have money to pay, you can put it into the offset. But you are tied in for five years, so I would always urge caution.”

simon.allin@ft.com