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Mortgages as low as 3.35 per cent launched to help struggling owner-occupiers – but there’s a catch

Skipton Building Society has launched a low-rate mortgage range aiming to support borrowers at risk of payment difficulties (Mike Egerton/PA) (PA Archive)
Skipton Building Society has launched a low-rate mortgage range aiming to support borrowers at risk of payment difficulties (Mike Egerton/PA) (PA Archive)

Skipton Building Society has launched a low-rate mortgage range aiming to support borrowers at risk of payment difficulties.

The mortgage products will give owner-occupier Skipton borrowers approaching the end of their current deal, and who will be financially stretched on current rates, the opportunity to bridge their payments by maintaining a lower interest rate for two years.

The “member only” two-year fixed-rate deals include a 3.35 per cent rate for borrowers with a 40 per cent deposit and a 3.59 per cent rate for those with a 10 per cent deposit.

The deals do however carry a fee of 5 per cent of the existing loan amount, which can be added to the mortgage balance.

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The society said the products present members with “another option” and will not be right for everyone.

It's crucial lenders offer as much support as we can

Charlotte Harrison, Skipton Building Society

A 3.39 per cent rate for borrowers with a 25 per cent deposit and a 3.49 per cent rate for those with a 15 per cent deposit are also included in the product range.

According to figures from financial information website Moneyfacts, across all deposit sizes, the average two-year fixed homeowner mortgage rate on the market is 6.41 per cent. Fixed-rate mortgages have been edging down gradually in recent weeks amid expectations over inflation.

The society said the move extends the support that it already offers through the mortgage charter, which many lenders have signed up to in order to help borrowers who may be at risk of struggling.

Under the charter, lenders will offer adjustments to borrowers’ repayments, for example they may want to temporarily make interest-only payments or extend the term of the mortgage to make monthly payments more manageable.

“It’s crucial lenders offer as much support as we can to ensure borrowers remain secure in their own homes through these turbulent times, by looking at further opportunities to provide certainty and confidence in the ability to maintain payments,” said Skipton’s CEO of home finance Charlotte Harrison.

“Signing the mortgage charter was just one step in us providing support but we feel we can do more for our borrowers. It’s important we think differently, on what further support could be to make a real difference for our members who may be facing a future of financial difficulty due to the limited options on the market available to them.”

Skipton said the two-year low-rate products are intended for members who need this level of added support to help them during the current difficult times.

It will work directly with its borrowers who are facing financial difficulties to understand their individual situations and to offer options that help in the short and medium term.

“Our borrowers have benefited from strong growth in house prices over the last couple of years, earning them additional equity in their properties. For those who are financially stretched, this is a good time to consider if they can make that equity work for them,” added Harrison.

“We will always work directly with our borrowers to understand their personal situations and work with them on a solution that is most suited to them and their circumstances. This range of mortgages presents another option for our members – it’s not to say, that they will be right for everyone.”

Borrowers need to weigh up the overall cost of the product against their personal priorities

Stephen Perkins, Yellow Brick Mortgages

Stephen Perkins, managing director at Yellow Brick Mortgages, told website and news agency Newspage that borrowers should weigh up the numbers, saying: “This is a very innovative move by Skipton to effectively allow their existing clients to capitalise some of their interest in exchange for lower monthly payments, which will also increase their client retention and reduce risk of arrears.

“However, borrowers need to weigh up the overall cost of the product against their personal priorities.”

In May this year, Skipton launched a “zero-deposit” mortgage deal, giving people a helping hand on to the property ladder, and in September, Skipton said it has received more than £40 million in mortgage applications.

“Hats off to Skipton for thinking outside of the box, again, and challenging the market to look at their propositions and how they can help their customers at a challenging time for many,” Scott Taylor-Barr, financial adviser at Barnsdale Financial Management told Newspage.

Rachel Springall, a finance expert at Moneyfacts, said: “It is good to see Skipton Building Society supporting its existing borrowers with more options for their consideration when coming off a deal. These options may well be a lifeline for some existing borrowers but it is vital they explore other options from alternative lenders too.

“Anyone concerned about rising repayments would be wise to seek independent advice to go over all the options available to them, as they will need to consider all the associated costs when changing their deal.”