Mortgage lenders have launched a series of low rates for borrowers with small deposits.
Last week, HSBC introduced a 3.49% five-year fixed rate mortgage, with a £999 fee. However, this has since been beaten by Clydesdale and Yorkshire Bank, which released a five-year fixed rate deal at 3.39%, also with a £999 fee.
Head of Lending at the Mortgage Advice Bureau (MAB), Brian Murphy, says that although these deals are competitive, some borrowers may find that loans with slightly higher rates actually offer a better deal.
He explains: “Mortgage products with high fees but potentially lower rates are not a new phenomenon.
“Lenders often offer a range of combination products, as different product features will appeal to different borrowers. Some are comfortable with high set-up fees to secure a lower monthly payment, particularly if this guarantees a low rate for as long as five years.
“However, others will want to minimise their upfront costs but are more comfortable with a slightly higher monthly repayment. This allows them to utilise their available funds for other household expenditure, which can be considerable – particularly when buying for the first time.
“As with most things in life, no one size fits all. A mortgage broker will ascertain what is important to each client and advise them accordingly based upon their individual preferences, needs and circumstances.”1
Clydesdale and Yorkshire also announced details of a two-year fixed rate deal for borrowers with a 10% deposit, at 2.39% with a £999 fee, available for purchases and remortgages.
For first time buyers with a 5% deposit, Clydesdale and Yorkshire introduced a three-year fixed rate deal at 4.49%, with no fee, a free valuation and £250 cashback.
However, a five-year fixed rate deal from Tesco may be better suited to some first time buyers, which is also priced at 4.49%, with a £495 fee. Despite having no incentives, this mortgage gives more long-term security against rate rises.