ING Enters The Mortgage Market

Well-known for shaking up the savings market, ING Direct is now challenging the market for home loans. So what's the deal?

A few years ago no-one had ever heard of ING Direct here in the UK. And then suddenly the Dutch-owned bank swooped into the savings market grabbing headlines and customers by the bucket load with its 'open, honest and simple approach'. One respectable savings rate for all regardless of how much is invested and three years later, ING now has a customer base of one million savers.

And now it's turning a beady eye on to the mortgage market with, they claim, a 'no frills' home loan. Or, rather, two of them.

The first offers a fixed rate of 4.95% for two years and then it reverts to their standard variable rate, currently 5.14%. There is an arrangement fee of £495 but the basic valuation fee is refunded on completion. If you repay the loan early in the first two years there's an early redemption charge of 1% of the outstanding loan. You are, however, allowed to overpay up to 10% of the original loan each year.

And, as an incentive to remortgagers only, the valuation and legal fees are covered for you although you have to use their own remortgage service.

The second offers a flexible mortgage with a variable rate of 5.14% along with the promise that this rate will always be less than 0.9% above the Bank of England base rate. There are no arrangement fees or early repayment charges and the valuation fee is refunded on completion. First-time buyers have to pay legal fees but remortgagers can avoid the valuation and legal fees altogether. You can also overpay, underpay and take payment holidays.

So, what's the verdict? I applaud the clarity but there are more competitive deals elsewhere. For example, according to according to the Motley Fool's mortgage comparison service, powered by independent financial researcher Moneyfacts, Alliance & Leicester is offering a two-year fixed rate deal for 4.64% while Yorkshire Building Society has a three-year fix for 4.75% although both have higher arrangement fees. Discounted variable mortgages are even cheaper.

However, the cheaper interest rates will be of more importance to those needing very high mortgages where the difference in monthly payments may be significant. Those wanting a small mortgage may find they prefer ING's straightforward approach although I think it's a shame that the offer of free legal fees doesn't also apply to first-time buyers.

> See if you can get a better deal with the Motley Fool's Mortgage Service