Borrowers will be offered one per cent of the outstanding balance, either in cash or to reinvest in the mortgage, potentially paying the mortgage off two years early on a 25-year term or taking roughly £7,000 on a £100,000 repayment mortgage.
The tracker rate is 1.24 per cent above Bank of England base rate, giving a current pay rate of 5.24 per cent - and is available to a maximum of 95 per cent LTV on both interest-only or repayment loans.
Ambrose McGinn, director of Abbey for Intermediaries, said: “The Reward mortgage is a genuinely new approach to rewarding loyalty. We think it’s a great choice for people who don’t want the cost and bother of remortgaging every couple of years.
However, Hilary Osborne, editor of What Mortgage, commented: “If borrowers opted for a 4 per cent tracker instead and overpaid by 1.24 per cent for the first two years they’d probably be better off.”
Angus Macleod, corporate affairs manager at Standard Life Bank, which offered a similar product until recently, said: “These products are aimed at people who want certainty and want to slice down debt. Borrowers of these types of mortgages are reasonably financially aware and tend to have a negative attitude to debt.”
Another consumer specialist, who preferred anonymity, said: “I don’t think people should be dazzled by the prospect of a few hundred quid in a couple of years time.”
· Abbey has launched a promotional assault on the flexible and offset mortgage market with the production of literature for brokers, and consumer tools to aid understanding and sales of the products. Intermediaries can get a copy of the pack by calling 0141-944 3926.
