The Week Unzipped: New split loan mortgage allows wary borrowers the option to fix and float

WHEN it comes to choosing a mortgage, the biggest headache is whether to fix or float. If you fix your rate, you guarantee being able to meet the repayments should interest rates soar, but you could end up paying over the odds if rates fall.

Now HSBC has solved the problem by introducing a split loan mortgage, which allows borrowers to fix part of their mortgage, while interest on the rest of the loan remains variable, tracking base rate.

Customers can choose to fix either 25, 50 or 75 per cent of their loan, with the rest on a lifetime tracker. The rate you pay depends on the size of the deposit plus the amount you decide to fix.

Initially, the unfixed element has the same interest as the fixed, but will rise in line with interest rates. Given that interest rates have only one direction in which to move, it would make sense to fix as big a slice as possible.

Rates start at 2.49 per cent fixed for two years for a 25 per cent fix combination with a 30 per cent deposit. If the same borrower wants to fix half the mortgage, the rate rises to 2.69 per cent or to 2.99 per cent for a 75 per cent fix. The mortgage is also available at 80 per cent loan-to-value.

Interest rates are higher with a 20 per cent deposit, ranging from 2.99 per cent to 3.89 per cent. There is a 999 booking fee.

Although cheap in the short term, the tracker element is sitting at between 1.99 per cent and 3.45 per cent over base. And, as this deal ends after two years, you might find yourself having to remortgage just as rates head seriously north. Then you may regret not having opted for a longer-term fix.

House sales rise

UK HOUSING market activity has continued to pick up after the post-Christmas slump, according to the latest figures released by HM Revenue & Customs. Sales rose by 22 per cent during March to 72,000, an increase of 24 per cent on the same month last year.

Sales are still below half the level of March 2007. However, the latest survey of lending, from the Bank of England, suggests the market may be about to pick up. The research found that gross lending for house purchase increased in March, as did mortgage approvals for house purchase.

Capped tracker

COVENTRY Building Society has launched a capped base rate tracker mortgage which allows customers to benefit from the low base rate while offering protection if interest rates rise.

The product tracks base rate plus 2.49 per cent for two years and caps at 3.99 per cent so borrowers are guaranteed their interest rate won't be higher than that for the two-year period.

The mortgage is available with a 35 per cent deposit.

Cash for switching

ALLIANCE & Leicester is urging consumers to check they are getting the best deal on their current account and offering a 100 cash incentive to switch to Santander's premier current account.

The bank's research revealed that 34 million people have not switched their main current account since 2000, and three quarters say they have no plans to review their current deal.

The premier current account, which pays 0.5 per cent, offers free annual travel insurance and an interest-free overdraft for 12 months. The 100 bonus is available to customers who switch after 27 April.

Daily discounts

BRITONS use more than 2.4 million discount vouchers daily, saving money on anything from eating out to new clothes, according to moneysupermarket.com.

The trend of offering money-saving vouchers to attract customers began during the recession, but even though the economy is showing signs of improvement, consumers are still getting the most out of the discounts available. Voucher use has topped 100,000 per hour for the first time.

The average UK consumer searches online six times a week for discounts and deals and hands over at least three vouchers every eight weeks. Coupon users are saving nearly 55 every month, with one in seven clocking up more than 100 of discounts a month.