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Leeds BS introduces niche fixed-rate option

Leeds BS introduces niche fixed-rate option

The question for most borrowers recently has not been whether they should take a fixed rate, but more one of how long they should fix for.

They have a host of options offering the chance to lock into a rate for anything from just a couple of years to as many as 15 years and almost everything in between.  

Fixed rates have been priced so favourably and the base rate is still so low that the potential downside of fixing is virtually removed, as they are hardly likely to feel marooned on a high rate. 

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Certainty is what most people are looking for, but that also has to be balanced against the fact that certainty generally comes with a tie in.  

The vast majority of fixed rates will carry early repayment charges throughout the fixed-rate period.  

That could dissuade some borrowers from taking a longer-term bet, especially when the current political and economic backdrop has been in such turmoil.  

Even as some clarity begins to emerge around Brexit and the new government makes its future direction clearer, there will remain something of a dilemma for borrowers. 

Some homeowners may be putting off a decision on moving home and want to leave their options open, but equally do not want to expose themselves to any increases in interest rates that may or may not come down the track.

Leeds Building Society has attempted to tag a new range of products for exactly that type of customer. 

Its new Flexit products offer two and five-year fixed rate options, both of which carry no early repayment charge even during the fixed-rate period. 

Rates on offer are 1.71 per cent and 1.97 per cent respectively up to 75 per cent loan-to-value, with a £999 fee and both products have some fee incentives attached.  

The rates are clearly not as low as those on offer to anyone that is happy to be tied in with ERCs. 

However, nor are they sky-high rates and the choice for customers is there – pay a bit more for complete flexibility in case circumstances do change, or tie into a cheaper, more traditional deal with an ERC but with the chance that a penalty may be incurred if their situation alters.

There is not a great deal of competition in the market, although Coventry Building Society also offers a number of deals without any lock-in period.

The new Leeds products may therefore offer a useful option, albeit for a fairly niche type of borrower.

David Hollingworth is associate director of communications at L&C Mortgages