A helping hand from Yorkshire Building Society

Since August 2007 Yorkshire Building Society borrowers who are coming to the end of fixed rate mortgage deals lower than 5% have been facing large increases in their monthly payments. The increase in Bank of England base rates over the last three or four years from 3.50% in July 2003 to 5.75% in July 2007 has meant that short term fixed rate mortgages have jumped in cost by as much as 3.00%. Furthermore, mortgage rates have been kept artificially low because a typical arrangement fee has increased from £500 to £1000 to make up the shortfall.

The jump in cost is proving difficult for many people so the popularity of stepped fixed rate products is growing with the Society’s customers.

Chris Edwards, Head of Mortgages and Savings with the Yorkshire said, “ We introduced a stepped rate product in August for existing borrowers coming off lower rate deals and so far a large number of borrowers have taken it out. The mortgage has a first year rate of 5.99% and 6.79% in year 2, it is totally fee-free and therefore has no additional costs for the borrower. Despite many competitive products being withdrawn in recent weeks we have kept this product available and it has proved very popular with our customers. We are writing to another tranche of borrowers whose current product is about to mature this Friday with the same offer.”

Chris Edwards continued, “ We are noticing a swing away from people wanting 2 year deals and asking for 3 to 5 year options. We are therefore looking at a further stepped rate product over 3 years and also one for new customers to the Society.”