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First 0% Interest Mortgage launched by LBS

With mortgage rates falling, Leeds Building Society has taken a step further than the competition and is now offering the first 0% interest mortgage to hit the market.

The falling rates have sparked a price war between lenders who are all looking to offer the most attractive deal to buyers, but this is the first time a mortgage lender has been seen to offer a rate of 0pc. However, the rate will only last for the first six months of the deal before being increased thereafter.

While this may help to free up money to cover the costs of moving, and particularly importantly for first-time buyers, furnishing the home, all borrowers should be aware that after the initial six month period they will have to pay a slightly inflated rate to cover the cost of the 0pc period.

The rate that borrowers will receive will depend on the size of the deposit they have managed to raise. Those who enter the deal with a 10pc deposit will have to pay back a rate of 5.22pc on a three-year deal, for the remainder of the term. Borrowers who can stretch to a deposit of 20pc will receive lower rates, with 3.79pc for a three year deal and 4.23pc for a five year deal.

Introductory offers such as these are common among other financial products, such as savings accounts and credit cards, but this is the first time this has been witnessed in the mortgage market, and that is positive according to Andrew Hagger, a mortgage analyst.

He said “It’s good to see a bit of innovation in the mortgage market. This offers some flexibility to borrowers without any hidden catches or additional costs. Borrowers aren’t paying any more for taking this interest-free option”

However it is advised that before choosing a mortgage deal you shop around to find the best deal to suit you.

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