Focus on: Fix your mortgage at 2.79% for five years

Published:
21 November 2012
Topic:
News,Money,Mortgages,Product review

A saver's poison is a mortgage borrower's cure in this low interest rate environment.

The Bank of England base rate continues to languish at just 0.5%, and even fixed-rate deals are getting better and better, especially if you have a good-sized deposit.

The good news for anyone looking for a five-year deal is that Co-operative Bank has just launched a table-topping rate of 2.79%, fixed for that term.

As ever though, you'll need a fair whack of existing equity or a large deposit to benefit from this eye-catching new deal.
Here, we investigate the pros and cons.

What's the deal?

Co-operative Bank customers will be able to lock into the bank's five-year fix at 2.79% from Friday, November 23.

The market-leading rate comes with a relatively low arrangement fee of £999 compared to some other cheap deals on the market.
However, unlike most of the other mortgages in the Co-operative Bank's new range, there isn't a "no-fee" version of the deal - so the set up costs, in this particular case, are unavoidable.

The deal is also only available to those with a deposit of at least 40% to put down.

The good news for anyone interested in taking out the mortgage, however, is that the bank has pledged to continue offering this cracking rate at least until the end of the year.

Any catches?

As mentioned above, most Co-operative Bank mortgages now come with a no-fee option. However, the market-leading five-year fix is not included in this initiative.

Anyone wanting a five-year fixed rate with no arrangement fee will therefore have to pay at least 3.39% although they will only need a deposit of at least 25%.

Alternatively, they could borrow at 3.09% for two years for no fee provided they have a 40% deposit to put on the table.

The other downside to the deal is that, in return for the shelter of such a low cost, you will be tied into the deal for the duration. Penalties to exit the deal early though decrease as you progress through the deal.

You will pay 5% of the amount redeemed in year one; 4% in year two; 3% in year three; 2% in year four and 1% in the final year five.

What's the verdict?

The new five-year fix at 2.79% from the Co-operative Bank is undoubtedly an appealing offer for anyone keen to lock their mortgage costs for the longer term.

And, so long as you have a large enough deposit, it is the best deal of its kind available today.

With the base rate currently so low, opting for a five-year fix at such a low level could prove a smart move a year or two down the line.

Borrowers in need of smaller amounts should do their sums before applying, though, as the £999 arrangement fee could make it worth paying a slightly higher rate to avoid a fee.

This is because they will be paying back a smaller amount overall.

Top tip

 While mortgage borrowers with smaller deposits cannot benefit from the market-leading rate of 2.79%, Co-operative Bank has also reduced its rates for those with 10% or 15% to put down.

First-time buyers struggling to get a foot on the property ladder can also now access the bank's two-year fixed rate at 3.99% via one of its Share to Buy mortgages.

These enable borrowers to get on the property ladder by taking out a mortgage jointly with friends, a partner or relatives - as long as they can provide a deposit of at least 10%. 


And to help cash-strapped first-time buyers even more, there is no arrangement fee with this deal.


Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct,

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About This Author

Jessica Bown

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Financial journalist

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