Buyer beware: working out the total cost of a mortgage


Cheap mortgage rates mean first-time buyers are putting the smallest proportion of their income towards their mortgage payments for the first time since records began in 2005, according to the Council of Mortgage Lenders. While this is great news, it’s getting the mortgage in the first place which can be a real problem. It’s all about the deposit – and for many first-time buyers, if they haven’t got help from the Bank of Mum and Dad, then home ownership is nothing but an impossible dream.

So it’s easy to see why fee-free mortgages, cashback or offers by lenders to pay Stamp duty, are so popular among first-time buyers. If you are strapped for cash, you will take any assistance you can lay your hands on. But borrowers need to be wary of such ‘offers’, work out their true cost and compare them with what else is on the market.

If you are borrowing, say £200,000, Yorkshire Building Society has just launched a fee-free deal that is not even the cheapest from that lender because it has loaded the rate. So its two-year fix pegged at 1.54 per cent with £345 fee is still cheaper than the fee-free deal which is pegged at 1.89 per cent.

If you really don’t want to pay a fee, Nationwide has a two-year tracker at 1.69 per cent with no arrangement fee, no valuation fee and £750 cashback – the cheapest first-time buyer product over two years. Of course there is no certainty with a tracker so this is not a sensible option if you are worried about paying your mortgage if interest rates were to rise.

It is important to consider the whole picture rather than just a low fee or a low rate and speak to an independent mortgage broker such as Anderson Harris who can advise what product is the most suitable for your needs.

Adrian Anderson
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Adrian Anderson