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Home borrowers in the UK urged to check out fees on reduced mortgage products

In the last couple of weeks fixed rate mortgages in particular have been sliding as lenders are eager to entice new customers but according to personal finance website uSwitch headlines can hide higher arrangement fees.

‘While falling rates are likely to be greeted with sighs of relief by thousands of borrowers, they don't come without a sting in the tail,’ said Michael Ossei, personal finance expert at uSwitch.com.

‘Some of the most competitive deals launched this week by Chelsea Building Society and First Direct come with hefty fees. While Chelsea's three year fixed rate mortgage offers one of the lowest rates on the market at 1.99%, borrowers will need to have a 40% deposit or equity and stump up an arrangement fee amounting to an eye watering £1,545,’ he explained.

‘While rates have fallen, fees have increased, to the point where they've now hit a 25 year high. But to get the best fixed rates consumers have no choice but to pay these high fees, and lenders know it,’ he explained.

‘While interest rates look unlikely to rise anytime soon, consumers remain wary about the future and many will feel they have no option but to pay a hefty fee so they can enjoy future peace of mind.

‘Looking ahead we expect to see lenders continue to launch more competitive long term fixed rate deals with higher LTVs. However, there will also be more encouragement for first time buyers as we expect to see an increase in the number of competitive 90% LTV deals too,’ he added.
 
But the lenders say they are simply offering borrowers more choice. The Chelsea Building Society says that its recently launched three year fixed rate mortgage at 1.99% at 60% LTV is its lowest ever.

‘Borrowers choose fixed rate mortgages to give them peace of mind and make it easier to budget for their monthly outgoings,’ said Chelsea Building Society product manager Brendan Gilligan.

‘The Chelsea has made a strong start to mortgage lending so far this year and we're really pleased to be able to offer another best buy fixed rate product. This three year mortgage gives additional choice to home buyers with a larger deposit, or home owners who want to remortgage and have at least 40% equity in their property,’ he explained.

He added that the new three year product complements the Chelsea's two year fixed rate mortgage at 1.74%, also at 60% LTV, which is the lowest two year fixed rate mortgage currently available. Each of the mortgages has a £1,545 fee.

And he added that borrowers with smaller deposits have not been forgotten as the Chelsea also offers a two year fixed rate mortgage at 90% LTV with a best buy rate of 3.69%, and a £1,545 fee. There also is a lower fee 90% LTV two year fixed rate mortgage at 3.94% with a £745 fee for borrowers wanting to limit their upfront costs.

First Direct, which was recently named Which? Recommended Mortgage Provider, has reduced its 90% LTV fixed rate mortgages by up to 30 bps for borrowers with a 10% deposit or equity.

The 90% LTV 3.99% three year fixed rate has a £999 booking fee; the 90% LTV 4.19% five year fixed rate has a £1,499 booking fee; but there is also a fee free 90% LTV 4.29% three year fixed rate and a fee free 90% LTV 4.49% five year fixed rate
‘In response to increased demand for high LTV mortgages we have reduced our 90% LTV rates by up to 30 basis points to ensure our customers have access to our most competitive rates,’ said Andy Forbes, head of retail products at First Direct.

‘Also, to drive down the up front cost of purchasing a property, First Direct currently offers a fee free option on all its 90% LTV mortgages, helping buyers avoid arrangement, booking and valuation fees,’ he added.

The lender has also reduced rates on other mortgage products for borrowers with larger deposits including a 65% LTV 2.39% three year fixed rate with £1,499 fee; its 65% and 75% LTV standard and fee free two and three year fixed rate repayment mortgages reduced by 10bps; a 65% LTV standard and fee free term tracker repayment mortgage reduced by 10bps and a reduction of 10bps on all two year fixed rate offset mortgages.

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