by Mark Johnston
The Post Office has reduced its mortgages rates in a bid to attract new customers and breath some life into its mortgage arm. Their two year fixed rate deal is now a market leader amongst banks and building societies in the sector.The Post office has offered financial products for quite some time. Being a wholly owned subsidiary of the Royal Mail group gives them the advantage of a nationwide network of branches across the country making it the UK’s biggest retailer. Historically post offices were established to accept mail but now they offer more than 170 different products and services including financial services and mortgages.
The two year fixed deal at 2.85% is currently a headline rate but it comes with a large fee of £1495 especially given that banks like First Direct have reduced their fees to £99. Borrowers would also require a large deposit of 35% as the loan to value (LTV) is 65%.
Anyone looking to take out a £150,000 mortgage would currently need to find around £700 in mortgage repayments per month. Over the two year period that works out as £16,792.08 and then with the £1,495 fee on top borrowers would be paying a total of £18,287.08.
In comparison the northern based Yorkshire Building Society is offering a 2.99% over the same two year period which would work out at £710 per month. With a smaller fee of £495, borrowers would only be expected to pay a total of £17,547 which is over £700 less.
Andrew Hagger, of Moneynet.co.uk, said: “This proves the importance of weighing up the total cost of your mortgage and not being swayed by a headline-grabbing interest rate. Arrangement fees vary drastically between providers, with some as low as £99. The shorter the term of your mortgage, the more impact the fees have.”
The post office offers a range of mortgages to suit everyone’s needs. Their tracker rate mortgage has a loan to value (LTV) of 75% and an arrangement fee of £995 for a 2.99% rate which is calculated using the current base rate of 0.5% plus 2.49% for the duration of the mortgage. Cost for comparison is 3.1% APR.
Their 85% loan to value (LTV) option works out at 3.99% (4.2% APR) with an arrangement fee of £995. For those looking for a mortgage that requires a smaller deposit, the post offices 90% loan to value (LTV) option is 4.99% (5.2% APR), again with the standard £995 arrangement fee.
The post office also offer a range of buy to let mortgages which in the current climate can be hard to come by. The first is a base rate tracker at 4.99% APR 5.3% which has a loan to value of 75% so a 25% deposit is required and a higher arrangement fee of £1,495.
Their buy to let fixed rate options still require a deposit of at least 25% but come in a range of rates from 5.25% for the 3 year version to 5.89% for the 5 year option. All options require a £1,495 arrangement fee and revert back to the current standard variable rate of 3.49%.
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