In recent weeks many lenders have announced cuts in their mortgage rates, leading to many people predicting that we may have turned that corner. The average rate on a two-year fixed rate mortgage has dropped from 7.08% at its peak on 11 July to 6.90% today, but typically there is a sting in the tail. During the last month the average fee has increased by nearly £100, meaning that borrowers have not benefitted as much from a reduction as expected.
On a £150K repayment mortgage, a £100 increase in fee equates to an additional 0.06% increase in the rate. Therefore, in real terms a customer has only benefitted from a net 0.09% reduction in the average rate, as opposed to the full 0.15%. Research conducted by Moneyfacts.co.uk has shown that some lenders have increased rates and fees and not brought either back down. Other lenders have reduced rates but increased fees; some lenders have switched from charging a fixed monetary fee to offering a percentage fee. On a positive note, swap rates have continued to fall and are now at their lowest level since 13 April. Predictions are that we should see further decreases in fixed rates from high street lenders before too long. It is imperative that anyone looking for a new mortgage deal makes sure they consider the true cost of the deal and not just look at the headline rate being offered.
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