- Mortgage rates have dropped to their lowest-ever level
- Lenders competing for borrowers remortgaging or raising capital
- But low headline rates can mask high fees that make deals more expensive
If you’ve got the money for a deposit, or are lucky enough to own your own home and have equity, mortgages have never been cheaper. However fees have never been higher.
Fierce competition among banks and building societies has driven mortgage rates lower and lower over the past months with a glut of lenders cutting rates again this week.
In the past fortnight Nationwide has dropped rates to new lows, while Skipton building society has reduced rates on their fee-free deals in the past few days.
The flurry of activity comes after figures released by the Bank of England last week showing the average mortgage rate dropped to 2.41 per cent in April from 2.49 per cent in March – its lowest ever – demonstrating the rapidly reducing likelihood of the Bank raising the base rate any time soon.
Naturally, for all the newest deals, size of deposit is key to the rates on offer and as a general rule, the larger the deposit, the larger the choice of provider, and the better the rates will be.
Another thing to consider whether you are close to lower LTV banding. If you are currently at 91 per cent LTV you may want to consider the benefit of stretching to a bigger deposit as the rates at 90 per cent will be better.
Beware the hidden cost of fees
While they may not be offering the cheapest rates available, there are plenty of lenders trying to tempt borrowers through their doors by removing fees altogether.
Homebuyers with a 10 per cent deposit or equity in their home can fix for two years as low as 2.59 per cent, pay no product fee and benefit from a free valuation and £250 cashback on completion or free legals.
Borrowers looking to buy or remortgage with just a 5 per cent deposit or equity are looking at a 3.84 per cent rate fixed for two years or a 4.49 per cent rate fixed over five years – both deals come with no product fees and either £250 cashback or free legals.
Other fees and incentives that are important to factor into the calculation include the cost of switching a deal.
Remortgaging can incur a valuation charge and costs for the basic legal work involved. However, many deals will now cover those costs with a free valuation and free basic legal work included in the incentive package.
A spokesperson for Frost Financial said: ‘It’s important that borrowers don’t simply head for the lowest rate on the assumption that it will be the cheapest deal.
‘There is much more to take into consideration when assessing the best total value and fees will play a key part. Some of the very lowest rates can come with significant fees which can have a strong impact on the overall cost of a deal.
‘As a result it makes good sense to look at the overall cost of a deal over the scheme period and based on the individual circumstances of the borrower.’
If you are looking to purchase a property, speak to Frost Financial today and let one of our friendly advisers find the best mortgage deal for you.