First mortgage rates descended to reach new lows, and now providers are upping the ante on fees in a bid to boost their all-round competitiveness. Figures from Moneyfacts.co.uk reveal that a quarter of the mortgage market now offers fee-free mortgages, which means that the number of fee-free deals has quadrupled over the last five years!
Fee-free mortgages now number 902 today, a staggering rise from the 220 deals available in 2010. This suggests that providers are increasingly keen to compete in other areas asides from the traditional headline rate in order to attract and retain mortgage customers.
This is great news for consumers, but unfortunately, these fee-free deals are often overshadowed by the glitter and glamour of low headline rates, which can make fee-free deals look like the poor relation. However, low-rate deals often carry hefty fees, which can make what looks to be a cheap deal a much more expensive choice.
"Too many borrowers still focus their initial attention on getting the lowest possible rate, without taking into consideration the true cost of the deal, where fees can have a significant impact," commented Charlotte Nelson, finance expert at Moneyfacts.co.uk. "It could be a costly mistake for borrowers to ignore the fee-free options, as by the end of a mortgage term they may find that they have thrown away money that would have been better spent paying off the mortgage."
What's more, the interest rates of fee-free deals no longer heavily outweigh those of low-rate mortgages that charge fees. For instance, the average two-year fixed mortgage with a fee has an interest rate that is only 0.20% lower than the average two-year fee-free fixed deal (2.71% compared with 2.91%). This means that, not only could borrowers save money that would be wasted on product fees, but they will also be choosing a mortgage that is cost-effective over the long term, too!
Indeed, Moneyfacts' calculations reveal that borrowers could save up to £1,500 with the lowest fixed rate fee-free deal, regardless of the length of the mortgage term, when compared with the true cost of a low-rate deal with a fee.
So, if you are looking for a competitive, cost-effective mortgage deal, it may be worth looking into what fee-free options are available on the market now. You can start your mortgage search with our mortgage best buy tables, which can give you an idea of what the most competitive deals are.
Check out the best fixed rate mortgage deals
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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