There has also been an increase in the number of mortgages with ‘incentives’ such as free legal fees or cashback as lenders make themselves more competitive to remortgage customers looking for a new deal.
This is according to figures published by number crunchers at Moneyfacts.co.uk, which reveal that products with a fee have seen rates plunge by 0.59% in the last four months. Meanwhile the average rate charged on fixed rate products with no fee has reduced by 0.52%.
It means these products now have average rates of at 2.30% and 2.28% respectively.
Impact of the pandemic
Moneyfacts suggested one of the reasons for the plunge in rates was that lenders were starting to factor in the Bank of England’s (BoE) two emergency interest rate cuts, implemented back in March when the pandemic began.
But, it is also due to the fact many lenders are no longer offering mortgages for people who need to borrow at a high rate and therefore have low deposits.
The fact there were still a number of fee-free products to choose from and the addition of many more incentive packages to the market confirmed lenders were finding ways to lure customers in.
Advice for those tempted by incentives
Eleanor Williams, finance expert at Moneyfacts, offered word of warning to anyone tempted into one of these deals.
“While the increase in proportion of products that carry an incentive package is inherently positive and can alleviate some of the upfront cost associated with a new deal, borrowers do need to be aware that these incentives are likely to only cover the basics,” she said.
“Typically, free valuations tend to be basic and it is possible to instruct a surveyor to ensure a more comprehensive survey is completed. Free legal fees will generally cover just the standard conveyancing but, for anything more complicated, there would usually be further charges or the option to appoint your own solicitor.
“Deciding on the right mortgage deal comes down to more than just the initial rate available. Seeking independent financial advice would be wise to ensure the overall cost can be considered and to ensure the best option for individual circumstances is pursued.”
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