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Fee Free Mortgages on the Rise

Personal_Finance / Mortgages Nov 29, 2016 - 03:01 PM GMT

By: MoneyFacts

Personal_Finance

Research from Moneyfacts.co.uk reveals that the number of fee-free deals available to those looking for a fixed rate mortgage has more than doubled over the past year. This has given borrowers looking to minimise upfront costs even more choice.


Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:         

“It’s great news that the number of fixed rate deals without a fee has increased by a staggering 606 products. With more deals now than ever offering a no-fee option, it is clear to see that lenders are trying to compete in ways beyond just the headline rate.

“At the same time, as the number of fixed rate deals with no fee has increased, the average fixed rate fee has increased too, rising from £954 to £984 over one year, giving the impression that products that charge a fee are disproportionately more expensive. This is mainly an attempt by providers to compensate some of their low rate deals with a higher fee, particularly as the average two-year fixed rate has fallen from 2.67% to 2.34% in the last 12 months.

“Too many borrowers focus their attention on achieving the lowest rate possible and miss out on some of the deals that end up being the most cost-effective. For example, borrowers opting for the lowest two-year fixed rate deal at 75% loan-to-value would be £1,072* worse off compared to a borrower who opted for the lowest deal with no fee.

“Fees can soon mount up, particularly if a borrower opts for a two-year deal and remortgages after the deal expires. This can make ignoring fee-free options a costly mistake, as the amount paid on the fee could instead be better spent overpaying the mortgage.

“It is important that borrowers looking for a mortgage ensure they do their homework and work out the true cost of a deal, looking at the rate, fee and any incentive package, so they can be sure they have found the most cost-effective option.”

*Based on a £200,000 mortgage over a 25-year term on a capital and interest repayment basis.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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