x
By using this website, you agree to our use of cookies to enhance your experience.

TODAY'S OTHER NEWS

Cheap mortgages come with "frightening" costs

The true cost of the lowest-price mortgages on the market is "frightening", according to new research from Moneyfacts.co.uk.

It said too many borrowers mistakenly think that opting for the lowest rate will save them money.

But many will be better off choosing a deal with no arrangement fee over a lower rate alternative.

Charlotte Nelson, finance expert at the site said: “Whilst these low deals look great on paper they are often compensated by high fees that can scare even the most seasoned borrower.

“With fees on mortgages ranging from nothing all the way up to £2,794, with the average mortgage fee sitting at £939, it is easy to see why it can be a costly mistake to opt for the wrong deal.”

Nelson said the low-rate high-fee deals favour those borrowers looking to purchase properties at the high end of the housing ladder.

"However, large fees can turn what appears to be a cheap deal into a costly one for the majority.

"For example by opting for the lowest two-year fixed rate mortgage at 60% LTV with no fee will mean borrowers will be around £1,500 better off a year compared the lowest option in that sector.

"Arrangement fees allow providers to have greater flexibility in what rate they offer, however the set-up costs are not greatly different between mortgages, so many will question what this actually for."

Nelson said that he size of the arrangement fee is particularly important on a two-year fixed rate, because of the short-term nature of the deal. "Borrowers will have to remortgage relatively soon and could again pay yet another fee."

She said borrowers need to work out the true cost of the loan. "There are deals out there with no arrangement fees so borrowers will have to decide whether they choose a trick or a treat when picking a mortgage."

icon

Please login to comment

Zero Deposit Zero Deposit Zero Deposit
sign up