Fixed rates on mortgages are looking increasingly attractive following the launch of a new 2.94 per cent two-year product from Lloyds TSB.
As the bank points out, fixed rates have historically been much higher than this, standing at a peak of 13.85 per cent in 1990 and 5.7 per cent as recently as 2007.
While the subsequent economic crash and historic low Bank of England base rate may have resulted in more attractive looking homeowner loans, house buyers should make sure they are aware of all the hidden fees that are included.
Among the added costs that you should factor into the overall price of a mortgage are booking, administration or arrangement fees, valuation fees, legal costs, mortgage Indemnity Guarantees (MIG) and higher lending fees, all of which can add up to a significant sting in the tale.
For example, the Lloyds TSB deal comes with a product fee of £1,895, and loans are only available on up to 70 per cent of the property's total value.
Here are a few things to consider when taking out a mortgage.
Shopping around
You should always look at what is available across the entire market. In doing so, you will not only be able to identify the types of mortgages that are most suited to your needs and best headline rates, but you will also be able to avoid many of the hidden fees that come with certain products.
Watching out for the sting in the tail
Make sure you are fully aware of all the costs and fees that you will be expected to pay. Look out for offers of refunded fees, but be aware that those with smaller fees often sport higher headline rates – there is a balancing act between rates and fees with providers doing their utmost to ensure they do not lose out, even when offering attractive deals.
Watch out for MIG fees
Most homeowners will want to avoid MIG or high lending fees, which are usually included on deals with larger loan-to-value limits or those where no deposit is required, if they are planning to borrow anywhere near 100 per cent of the value of their property. In such cases, MIG fees, which are not imposed by all lenders, can run into thousands of pounds.
Look out for bundled products
Many providers will attempt to bundle household contents, building and life insurance products with mortgages, while others will offer payment protection insurance to cover mortgage costs if you become sick or are unable to work. Make sure that you never feel forced into buying additional products, which can often be found cheaper elsewhere.
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