Why are the best mortgage deals are not always those with the lowest rates?
You may think that the best mortgage deals are those with the lowest interest rates but this is not always the case.
As the Bank of England base rate is at record low level some mortgage interest rates are being pushed down. However it has been reported that lenders are raising arrangement fees, in some cases by as much as 25% so this can have a major effect on the overall cost of a mortgage.
In a recent report it has been suggested that over the past three years the average arrangement fee has increased by around £300 to just over £1,500. On a smaller loan this can have a big impact that can change the balance of which are the best mortgage deals.
At Deal Direct we look at all the costs associated with a loan before advising which is the best product for you. At a certain level a loan with a lower interest rate actually costs more than a deal with a higher interest rate but with a substantially lower fee.
If you want a £120,000 mortgage with a rate fixed for three years for example, an interest rate of 3.75% and a fee of £2,249 fee will be more expensive than a mortgage with a 4.25% interest rate and a £999 fee. Although the loan with the lower fixed rate might appear to be cheaper, the higher fee makes it more expensive when you calculate the total cost over the three year period.
Call us at Deal Direct and we will look at the full details of the types of product you are interested in to make sure you really do get the best mortgage deals available.
