Newcastle Building Society has teamed up with mortgage broker Charcol to launch a zany home loan, great if Bank of England base rates keep falling. The mortgage is capped for three years at its starting rate of 5.99 per cent. Then, for every cut in the base rate, the mortgage interest rate will fall by twice as much. If the base rate continues to fall from its current level of 5.50 per cent for the next year or two, you should do very nicely.
The downside? Base rate increases will be passed on at double the rate, too. So on the way back up you will find your mortgage interest payments accelerating fast, though of course the risk is limited by the 5.99 per cent cap. The penalty for redeeming during the three-year period of the deal will be 3 per cent, then 2 per cent, then 1 per cent. There are no extended redemption penalties.
If you're doubtful about how far base rates will fall, you might prefer to fix. Savills Private Finance, the broker, and Wesleyan, the building society, are both offering two-year fixed rate loans at 4.99 per cent. That's the same as you'd be paying through Charcol if base rates fell by 0.5 points. The Savills loan has no extended penalties, but within the two years, a 5 per cent redemption fee applies.
At Wesleyan, where you get a third year at 0.5 points off the standard variable rate, the redemption penalty for the three years is six months' interest. All three deals are new and beat virtually everyone. According to data company Moneyfacts, the only better capped rate is 4.9 per cent from Britannia building society, although this lasts for only two years. The only better fixed rates - two-year fixes from Market Harborough (3.49 per cent) and Northern Rock (3.65 per cent) - charge redemption penalties for three or four years beyond the special deal.
The downside? Base rate increases will be passed on at double the rate, too. So on the way back up you will find your mortgage interest payments accelerating fast, though of course the risk is limited by the 5.99 per cent cap. The penalty for redeeming during the three-year period of the deal will be 3 per cent, then 2 per cent, then 1 per cent. There are no extended redemption penalties.
If you're doubtful about how far base rates will fall, you might prefer to fix. Savills Private Finance, the broker, and Wesleyan, the building society, are both offering two-year fixed rate loans at 4.99 per cent. That's the same as you'd be paying through Charcol if base rates fell by 0.5 points. The Savills loan has no extended penalties, but within the two years, a 5 per cent redemption fee applies.
At Wesleyan, where you get a third year at 0.5 points off the standard variable rate, the redemption penalty for the three years is six months' interest. All three deals are new and beat virtually everyone. According to data company Moneyfacts, the only better capped rate is 4.9 per cent from Britannia building society, although this lasts for only two years. The only better fixed rates - two-year fixes from Market Harborough (3.49 per cent) and Northern Rock (3.65 per cent) - charge redemption penalties for three or four years beyond the special deal.
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