Best Buy Mortgages
Last week many high-street lenders announced a reduction in mortgage rates, but buyers have since been warned that the cost of fees may increase significantly as a result.
Many high-street lenders reduced their mortgage rates in an attempt to attract new customers last week, a welcome move during the current turbulence. However, experts have warned that customers are being trapped into paying excessive fees for these mortgages – outweighing the benefits.
Recent analysis of the market has shown that, for a £150,000 loan on a £200,000 property, fees on a low-rate mortgage will prove extortionate. The best two-year fixed rate mortgages available will all cost the borrower as much as £166 per month for the term, amounting to more than £4,000 in total.
The unexpected drop in rates last week only signifies that, rather than the market becoming more competitive, the instability is actually set to continue. As the market changes on a daily basis buyers are being warned to be wary of deals that seem too good to be true.
Mform, who carried out the research, have discovered that settling for a mortgage at a slightly higher rate may actually be the most cost-effective. For example, taking out a mortgage with a rate of 5.3% over a two-year fixed period, and arrangement fee of £1,000 could offer the best saving. Buy a property worth £200,000 with a 25% deposit on this deal and you could see savings of £2,500, far better than going for a mortgage deal that offers a rate of 5%.
Buyers are also being advised to look beyond the high-street lenders to smaller providers, as they may be able to offer similar deals with the added benefit of more personal service. The Midlands offer the highest number of mortgage products, with Leicestershire in particular offering the most choice.
Buyers thinking of taking out a mortgage should do their research, and watch out for hidden costs before committing themselves to a deal.
