If they opted for the flat £995 arrangement fee and the marginally higher fixed rate at 3.98%, the total would be £16,915. Based on a £200,000 interest-only home loan, a homebuyer who chooses the 3.94% fixed rate would pay £17,760 over two years. It can be a different story with bigger mortgages. But if that same borrower went for the highest fixed rate of 4.39% and no fee, the total cost would be £6,146. Many borrowers would automatically opt for the low interest rate, but could end up out of pocket by doing so.īased on a £70,000 interest-only mortgage, opting for the 3.94% fix would cost the borrower £6,216 in interest and fees over two years. The bank also offers two other two-year fixes, one at 3.98%, but with a £995 flat fee, and another at an even higher 4.39%, but with no fee. To make matters even more confusing, many lenders offer several versions of the same product with varying fees.Īs David Hollingworth, of London & Country Mortgages, explains: "These different versions will tend to trade off providing a higher rate for a lower fee and therefore it is vital to make sure the balance is right for the individual's circumstances, rather than heading straight for the lowest interest rate."įor example, Alliance & Leicester is offering a two-year fix for people buying - rather than remortgaging - with an interest rate of 3.94% and 1% fee. This worked out cheaper over the two-year period than the lowest two-year fixed rate on the market at the time from Market Harborough at 3.95%, which came with a £1,094 fee.Īs Helen, who works as a payroll officer, stresses: "Even though there were lower rates available, the fact this had no arrangement fees was really important and made it good value." They remortgaged in July and opted for a no-fee, three-year fixed-rate deal with Abbey at 4.59%. Take Helen Simmonite, 31, and her fiancé Nick Waller, 37, from Doncaster, for example. All too often we forget about the fee by rolling it straight into the loan." Pierre Williams, head of research at, said: "Borrowers looking for a mortgage focus on rate, but the fee has to be a consideration particularly when these can run into thousands of pounds. In comparison, the average set mortgage fee is £790. On a typical home loan of £150,000, this equates to a steep £1,335. It claims these fees can vary from as much as 2.5% of the loan to as little as 0.4%, but that the average comes in at 0.89%. According to comparison website, over the past year the number of fixed-rate mortgages charging a percentage fee has increased from 43% of the market to 49%.
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