Alliance & Leicester mortgage dropping to 0.99% above base rate

Mrandylad

Hi there,

On 23rd March my A & L mortgage drops from 4.74% to 0.99% above the base rate. It's in my mortgage contact.
What is don't understand is the redemption penalty. Currently within my 5 year period, if I leave, it's an £11,000 redemption penalty.

If I let my mortgage roll on and take advantage of the new rate, will that redemption penalty still stand? Am I technically moving into a new contract, or am I free to leave when I want without paying a redemption penalty?

Many thanks.

Burridge60

Mrandylad wrote: »

Am I technically moving into a new contract, or am I free to leave when I want without paying a redemption penalty?

Many thanks.

This is the same mortgage contract that you took out all those years ago. It will remain as is until you choose to change it by moving or borrowing more money when possibly the terms will change.

As you have no doubt already realised this is a blindingly good rate and could be considered to be a bit of a "!!!! up" by the product design people at A and L that clearly didn't ever realise that the BoE rate could go as low as it now is!

Your mortgage offer will set out the terms for payment of the early repayment charge (ERC) and this will normally end when your fixed rate term ends.

Hope that helps. Carry on overpaying if you can or put it into a savings account if you can get a better rate elsewhere.

blueberrypie

Mrandylad wrote: »

Hi there,

On 23rd March my A & L mortgage drops from 4.74% to 0.99% above the base rate. It's in my mortgage contact.
What is don't understand is the redemption penalty. Currently within my 5 year period, if I leave, it's an £11,000 redemption penalty.

If I let my mortgage roll on and take advantage of the new rate, will that redemption penalty still stand? Am I technically moving into a new contract, or am I free to leave when I want without paying a redemption penalty?

Once the five years is up, you're free to pay off the mortgage without penalty - but you'd be mad to do so.

If you've extra funds (and you will, with that drop in interest rate), start saving them. You can easily achieve a savings interest rate that is better than your very low mortgage rate, and if the base-rate increases to the point where your mortgage interest is higher than your savings interest, you simply take the savings and pay it towards your mortgage.