February 13, 2013
- Lower rates don't always mean the best deals - average fixed rate mortgage fees up 17 per cent since June 2012
- Number of two-year fixed rate mortgages available doubles from 356 in June 2012 to 848 in February 2013
Mortgage rates have fallen to an all-time low and the number of products available has increased by 37 per cent as a result of the Bank of
Funding for Lending Scheme. The best rates are still only available to those with big deposits, but first time buyers are also benefiting from the best rates for years.
However, borrowers need to be aware of a possible sting in the tail according to analysis by
, with the average application fee on fixed rate products increasing 17 per cent and tracker products by nine per cent. In some cases the lowest rate does not necessarily equate to the best value mortgage.
The analysis by the UK's number one comparison site also found an increase in the number of fixed rate mortgages. Since
, the number of two-year fixed products has risen by 138 per cent, while the average rate has fallen 0.89 percentage points to a low of 3.56 per cent. The number of five-year fixed rate mortgages has increased by 51 per cent, while the average rate has dropped 0.70 percentage points. However, the application fees on two-year fixed rate mortgages have increased by 30 per cent in the same period, to an average of £1,033, while five-year fees have increased by 22 per cent to an average of £883.
As a result, anyone looking for a mortgage needs to make sure they do not overlook the impact of the fee and work out the total cost of borrowing, rather than focusing on the headline rate alone. Products with the lowest headline rates are not necessarily the best value over the term of the deal: once fees are factored in, a product with a slightly higher rate but lower set-up costs may actually prove cheaper.