It’s not only mortgage rates that have fallen, according to research by Moneyfacts.co.uk, but the cost of mortgage product fees has dropped too, helping borrowers reduce the upfront costs of a mortgage.
In December 2018, borrowers looking for a fixed mortgage deal paid an average fee of £1,047, and 67% of fixed mortgage deals came with a free or refunded valuation. Today, borrowers are looking at an average product fee of just £1,022 and 69% of the deals available come with a free or refunded valuation.
While the number of deals charging no fee has dropped, 41% of fixed deals are still fee-free and 50% are available with free or refunded legal fees.
Slashing the costs
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Lenders may well be cutting fixed rates to enticing lows, but not all borrowers will be drawn in by the initial rate alone. Indeed, there could be borrowers who want to save on the upfront cost of the deal, such as with product fees or paying out on other fundamentals”.
With competition in the market still intense, there are some attractive incentive packages for first-time buyers and remortgaging borrowers looking for a fixed rate deal before Christmas. Borrowers could slash their upfront mortgage costs and secure a low fixed-rate mortgage too if they do their homework.
It’s not just standard home loans that lenders are upping the competition on. Buy-to-let mortgage rates are creeping closer to homeowner rates, despite traditionally being a more expensive way of borrowing. Since the beginning of this year, the gap between the two mortgage types fell to just 0.62 percentage points when looking at average two-year fixed rate mortgages with a 75% LTV.
Part of the reason behind the increased competition among lenders is the fact that more people are tempted by locking into longer term fixed rates, due to ongoing uncertainty in the market and the fact that rates are so low.
Christopher Woolard of the Financial Conduct Authority said: “Intense competition means low prices as lenders cut rates to stay in the game — good news for borrowers. But it also means that lenders look to other areas of the market for growth.”
While trying to tempt borrowers with ever decreasing rates, lenders are increasing the products on offer for alternative borrowers, including buy-to-let landlords and even specialist limited company loans.