Daily Mail

Hidden £1,400 sting on lowest home loan rates

WE REVEAL THE REAL MORTGAGE BEST BUYS

- By Paul Thomas p.thomas@dailymail.co.uk

HoMeowNerS locking into rockbottom mortgage rates are being stung by a hidden £1,400 penalty.

This is because the top deals lenders advertise in newspapers, on television and on the back of buses are not always the cheapest.

These low-rate offers typically have large fees, which put up the cost overall. If you’ve got a small mortgage, it’s usually cheaper to go for a deal with a slightly higher rate and a low fee.

By contrast, those with larger mortgages are better off taking a lower rate with a higher fee. It’s vital you pick the right mortgage after the Bank of england hiked interest rates earlier this month.

The monthly bills of 1.4 million borrowers on tracker rates have risen, and more than 20 banks and building societies passed on the full 0.25 percentage-point rise to borrowers on standard variable rates — the rate you move onto after a fixed deal ends.

These borrowers will typically see their monthly payments rise by £22 a month on a £150,000 loan.

WHERE TO GET CHEAPEST DEALS

Two-year fixed rates are popular with borrowers as they are usually the cheapest deals. The lowest fixed-rate mortgage on the market for borrowers with a 40 pc deposit is yorkshire Building Society’s twoyear deal at 1.17 pc, according to mortgage broker L&C Mortgages.

on a typical £150,000 loan over 25 years, the monthly payments are £577 and the total cost over two years is £ 15,341, including the £1,495 fee. That rises to £15,816 when you factor in a property valuation at £ 175 and typical legal fees of £300.

But you would actually be better off going for Barclays’ 1.49 pc two-year fix, the L&C Mortgages data show. although the rate is higher and you would pay £22 a month more than the yorkshire deal, it doesn’t have any fees.

So over two years you’d pay £14,381 — or £1,435 less. If you have a bigger mortgage, the Barclays deal is not the cheapest, though.

The cheapest deal overall on a £300,000 mortgage, including fees, is Sainsbury’s Bank’s 1.19 pc two-year fixed, which has a fee of £745. It also comes with a free valuation and no legal fees. It is only available through a broker.

even though the monthly payments are £1,157, it costs £1,253 less than yorkshire’s 1.17 pc deal over the two years, at £28,504.

For borrowers with a £150,000 mortgage and a 25 pc deposit, yorkshire’s 1.17 pc rate is the lowest available. But the cheapest after fees is aa Mortgages’ 1.34 pc twoyear fixed rate. It has a £495 fee and offers £250 cashback.

It costs £589 a month and £14,771 over two years on a £150,000 loan. That’s £1,044 less overall than the yorkshire deal. on a £ 300,000 mortgage, yorkshire’s 1.17 pc deal costs £1,154 a month and £29,757 over two years.

But again, aa Mortgage’s 1.34 pc two-year deal is cheaper, costing £1,177 a month and £28,802 overall, including a £495 mortgage fee and around £300 for legal fees. That’s £955 less.

The lowest-rate deal for borrowers with a 10 pc deposit is atom Bank’s 1.79 pc, which costs £621 a month and £15,793 overall on a £150,000 loan (available only through a broker).

But the same bank’s fee- free 2.15 pc two-year deal is the cheapest overall. at £647, it costs £26 a month more but you save £270 after fees. By contrast, atom’s 1.79 pc is cheapest overall on a £300,000 mortgage. The monthly payments are £1,241 a month and it will cost you £30,687 over two years.

CUT COSTS AND BEAT RATES RISE

More and more people are fixing for at least five years to protect against rising costs. The Bank of england signalled it could increase interest rates from 0.5 pc now to 1 pc by 2020. For borrowers with a 40 pc deposit, the lowest rate on a five-year fix is Sainsbury’s 1.68 pc. It is also the cheapest overall. on a £150,000 mortgage, it costs £613 a month and £37,505 over five years, including a fee of £745. Sainsbury’s also has the lowest and cheapest five-year rate for borrowers with a 25 pc deposit at 1.83 pc. on a £150,000 loan, it costs £623 a month and £38,151 over five years, including a £745 mortgage fee.

Sainsbury’s deal is also the cheapest on a £300,000 mortgage.

For borrowers with a 10 pc deposit, the lowest five-year rate is atom Bank’s 2.45 pc. It costs £669 a month and £41,049 overall, including the £900 fee.

atom’s 2.49 pc deal is cheaper, though, as it doesn’t have any fees. on a £150,000 mortgage it costs £672 a month and £40,330 — £719 less than atom’s 2.45 pc deal.

If you have a £300,000 mortgage, atom’s 2.45 pc deal costs £1,338 a month and £81,199 overall.

atom Bank’s slightly higher rate of 2.49 pc costs £80,660 overall — £539 less than atom’s 2.45 pc deal.

Shop around through an independen­t broker who can scour the market for the best deals. Find a local broker by visiting unbiased.

co.uk or by calling 0800 023 6868.

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