No fee fixed-rate mortgages on the increase

Wednesday 30th November 2016

The number of fee-free mortgages available to those searching for a fixed rate deal has more than doubled in the past 12 months, according to findings from Moneyfacts.co.uk. Borrowers eager to reduce upfront costs have now been given more choice as a result of this rise in fee-free deals. 
The research found that the number of fee-free fixed rate deals has risen from 556 a year ago to 1,162 today. This is a significant dent in the 2,854 fixed-rate mortgages currently available on the market. 
“It’s great news that the number of fixed rate deals without a fee has increased by a staggering 606 products,” Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, commented. “With more deals now than ever offering a no-fee option, it is clear to see that lenders are trying to compete in ways beyond just the headline rate.”
While the number of fee-free fixed rate deals has increased, the average fixed rate fee has also gone up, rising from £954 to £984 over one year. 
This is, Charlotte Nelson says, an attempt by providers to compensate some of their low rate deals with a higher fee, especially now the average two-year fixed rate has dropped from 2.67% to 2.34% in the last year alone.
“Too many borrowers focus their attention on achieving the lowest rate possible and miss out on some of the deals that end up being the most cost-effective,” Nelson advises. “For example, borrowers opting for the lowest two-year fixed rate deal at 75% loan-to-value would be £1,072 worse off compared to a borrower who opted for the lowest deal with no fee.” 
She adds: “Fees can soon mount up, particularly if a borrower opts for a two-year deal and remortgages after the deal expires. This can make ignoring fee-free options a costly mistake, as the amount paid on the fee could instead be better spent overpaying the mortgage.”

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