Borrowers looking for a new mortgage deals may be paying higher rates but they are also benefiting from lower fees at the moment.
This is according to the latest analysis of mortgage rates which has uncovered the product fees on fixed-rate deals have fallen on average by £18 in the last year.
What’s more, there are also more deals available with no fees than a year and lenders are charging less for those mortgages which carry a product fee.
With average fixed rates rising to above 3% for the first time in seven years, the fact borrowers are benefiting from less financial pressure on fees will come as welcome news.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Mortgage rates may be on the rise but it’s not all bad news for borrowers as they can still find an abundance of options to help them save on the upfront cost of their deal.”
She added: “Weighing up a deal on its true cost is vital, particularly as the rate gap between average fixed rates with a product fee and those without has reduced.
“Due to the changes in the mortgage landscape borrowers may find themselves better off by looking beyond headline-grabbing fixed initial rates, especially as interest rates continue to rise.”
Why a deal may not be all it seems…
It’s important to make sure you have the full picture when taking out a mortgage and just because a rate is eye-catchingly low it doesn’t mean it will be good value.
Rachel explained how, back in September 2021, there were some lenders offering mortgage deals with interest rates below 1%.
However, in the same month the average mortgage fee was just £16 shy of the record high recorded in 2012.
“Low-rate fixed mortgages can carry some of the highest fees, so they may not be the best choice for every borrower,” explained Rachel, “so seeking independent advice to assess the overall deal is wise.”
Want to remortgage?
If you are due to remortgage but worried about the initial outlay of costs you can also take advantage of the low-fee environment.
Rachel explained: “Remortgage customers could stand to make substantial savings by switching their mortgage, and those who may be cash-strapped can find fee-free offers as well as deals that cover their legal fees, valuation or even pay cashback to help with upfront costs.
“First-time buyers can also stand to benefit from these incentives if they have exhausted their savings.”
| Fixed mortgage market analysis (source: Moneyfacts.co.uk) | ||||
| Jun-20 | Jun-21 | May-22 | Jun-22 | |
| Average product fee (excluding deals with no fee) | £1,018 | £1,075 | £1,074 | £1,057 |
| Deals with no product fee | 959 (40%) | 1299 (35%) | 1632 (37%) | 1735 (40%) |
| Deals with free/refunded legal fees | 1,252 (52%) | 1816 (49%) | 2203 (49%) | 2203 (51%) |
| Deals with a free/refunded valuation | 1,863 (78%) | 2695 (73%) | 3166 (71%) | 3105 (72%) |
| Deals with cashback | 781 (33%) | 1108 (30%) | 1276 (29%) | 1350 (31%) |
| Average rate (deals with fee) | 2.43% | 3.08% | 3.50% | 3.68% |
| Average rate (deals with no fee) | 2.32% | 2.87% | 3.29% | 3.71% |
| The % shown is the proportion of deals out of the fixed mortgage market. Source: Moneyfacts.co.uk. Data shown is as at the first available day of the month, unless stated otherwise. | ||||
