Mortgage blog: Leading lender launches 0% mortgage deal
How would you like to pay no interest on your mortgage for the first six months? Well, now you can after a leading building society launched a deal with a 0% interest rate - thought to be the first product of its kind in the UK.
The Leeds Building Society has unveiled a mortgage with a zero interest rate for the first six months, cutting your monthly repayments significantly. But is it a gimmick or could it genuinely help you to save money as you move into a new home?
0% interest rate can help you cut the initial cost of your mortgage
The brand new deal from the Leeds is available on a three- or five-year fixed rate and gives you the option of paying no interest for the first three or six months. The interest rate paid thereafter will depend on the chosen interest-free period and how long you choose to fix for. The three-year fix starts at 3.79%, with three months at 0%, and the five-year fix at 4.23% with six months at 0%.
During these months you will still have to pay off the capital, and the interest you do not pay at the beginning will be added into the later payments. However, the initial payments will be considerably lower than if you had opted for a standard deal. The society said that the total interest paid by a borrower over the term of the mortgage was broadly the same as the amount paid by someone who opted for one of its standard fixed-rate loans.
Kim Rebecchi, the society's sales and marketing director, says: "These products offer excellent value and support borrowers in the early months in their new home. Depending on the size of the mortgage and the 0% period chosen, borrowers can initially reduce their outgoings by thousands of pounds, allowing them the flexibility to improve their property and manage their cashflow. Furthermore, their monthly payment after the 0% period does not increase significantly compared to a standard fixed-rate product, avoiding a payment shock."
Keith Osborne, editor of WhatHouse.co.uk welcomes the deal. He says: "What I like about this new scheme is that there is no sting in the tail. The overall cost is almost exactly the same as what you would pay on one of the Leeds' traditional deals and so, in that sense, you're not being penalised for taking the 0% deal.
"This is a genuinely innovative product and is set to be popular with buyers who want to minimise their repayments in the early months when they are likely to need to free up cash for other purchases."
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