by Mark Johnston
The fear of falling house prices and higher deposit requirements remain the main stumbling blocks in obtaining a mortgage. However application fees, which can run into hundreds of pounds, are now becoming another burden for hard pressed home buyers.
The fees for mortgage products have increased by approximately 6% since June 2011, thus making it more difficult for borrowers to compare the true cost of mortgage deals. For example took out a typical £200,000 mortgage with a fixed rate of 1.99% and a fee of £1,999, repayments would be around £847 a month.
David Hollingworth of mortgage brokers London & Country said “it is always good news when lenders cut any type of fee, but it is worth pointing out that different lenders have different names for fees”.
Falling mortgage rates has also been seen on the market at the moment and this too is also good news for borrowers. However while rates are falling substantially only those who are able to raise large enough deposits are able to benefit from the cheapest deals.
The HSBC has launched a new cheap 5 year fixed rate deal at 3.34% with a fee of £999 for those with a deposit of 40%. This deal comes as the nationwide building society also reduced the rate of its 5 year fixed deal to 3.69%.
As new figures reveal average fixed rates have hit a record low the Chelsea building society is another lender to cut their rates, their cheapest 10 year fixed rate is 3.99% an is available to those looking to borrow 65% of their property’s value, but it comes with a huge fee of £1,999.
The Yorkshire building society cut its rates on both tracker and fixed mortgages to tempt those wavering over a variable rate. Their top tracker deal is 2.29% and the best 5 year fixed rate is 3.39%, both are for those with a 25% deposit. For those with smaller deposits of 15% and 10%, the rates are trackers at 2.99% and 3.99% and fixed at 4.09% and 5.09%, depending on the deposit. All these mortgages come with a fee of £995 and the fixed rate deal also comes with early repayment charges that apply to the full 5 year period.
Leeds building society has launched their lowest ever 2 year fixed rate mortgage at 1.99% as long as the borrower can raise a 25% deposit and are willing to pay a whopping £1,999 fee.
However the building society has said its funding for this low deal is limited and therefore it is likely to have a short shelf life.
With this in mind borrowers should be aware that the cheapest mortgage rates are often withdrawn quickly by lenders if they see a sudden flood of demand.
In conclusion any bid by lenders to improve their competitive position has to be an improvement, although it is only when there is more of an appetite to lend that products will become more competitive and margins will be n
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