Property loans to write home about

THE LOWDOWN... ON BAGGING A MORTGAGE

A MORTGAGE war is raging as lenders compete to lure in borrowers with rock-bottom interest rates.

With thousands of deals and complex fee structures, it can be a nightmare to choose the right loan.

One thing’s for sure, if you’re languishing on your lender’s Standard Variable Rate (SVR) – the default rate you end up on when a mortgage deal ends – you’ll be paying way over the odds.

The average SVR is around 4.6%. Some are almost 6%, compared to deals at a good 2% below that.

So there are potentially big savings to be made.

Andrew Hagger, from Moneycomms.co.uk, said: “Whenever you’re comparing mortgages, always ask for the total cost of the loan, including the fee, and make sure you understand what early redemption fees are applicable before you sign on the dotted line.”

Here’s how the different types of mortgages compare and the current best buys:

Tracker/discount mortgages

WHAT: Flexible products with interest rates that can go up or down – usually track either the base rate or the lender’s SVR.

PROS: Low interest rates that could get even lower if the base rate or lender’s SVR drops. Plus, some offer flexibility to switch a product without a penalty.

CONS: You’re at the mercy of base-rate hikes or lenders’ whims at increasing their SVR anytime they wish.

BEST BUYS:

Yorkshire Building Society – 0.89% interest rate, £1,495 fee, 35% deposit

Principality Building Society – 1.5%, £895 fee, 15% deposit

Leek United Building Society – 1.89%, £199 fee, 10% deposit

2-year fixed rates

WHAT: Short-term deal that has to be renewed every two years.

PROS: Low rates even for those with smaller deposits.

CONS: Fees can be high over such a short term, and you’ll have to cough up again in just 24 months. If, as predicted, the base rate rises you risk higher interest rates when the deal ends.

BEST BUYS:

Yorkshire Building Society – 1.18%, £995 fee, 25% deposit

Post Office Money – 1.77%, £495 fee, 15% deposit

Leek United Building Society – 1.9%, £995 fee, 10% deposit

5-year fixed rates

WHAT: Guarantee your mortgage repayments for the next five years. PROS: The impact of the fees is less because it’s spread over a longer term. CONS: Rates could go down further over the five years and you’ll be stuck paying more until the end of the deal.

BEST BUYS:

Yorkshire Building Society – 1.74%, £995 fee, 35% deposit

Leeds Building Society – 2.2%, £999 fee, 15% deposit

Leek United Building Society – 2.55%, £995 fee, 10% deposit

10-year fixed rates

WHAT: Guarantee your mortgage repayments for the next 10 years.

PROS: Longer-term peace of mind with no risk of rate hikes during the current economic uncertainty. Good rates at below 3%.

CONS: Circumstances may change over such a long term and you’ll get charged if you need to get out of the deal early – fees can be up to 6% of balances. On a £150,000 loan, that’s £9,000.

BEST BUYS:

Coventry Building Society – 2.49%, £999 fee, 35% deposit HSBC – 2.64%, fee free, 30% deposit Barclays – 2.69%, £999 fee, 20% deposit