26 October 2012

Low rates, high fees?

The old saying goes ‘don’t believe everything you read’ (apart from this column of course!).  There’s a lot of very good marketing and PR taking place in the mortgage market as lenders try to increase business volumes and attract new customers in the last quarter of the year.  But are things as the headline suggests?

Even Watchdog touched on the promotion of certain products from lenders offering low rates but with the relevant lender arrangement fees ‘soaring by up to 70%’!

As I keep saying, a mortgage is the biggest debt you are likely to ever take on and you need to do your homework, check the fees and do your sums! 

That’s the benefit of using a professional mortgage brokerage that will look at the overall cost to you over a period of time, not just the promotional rate from day one.  If it’s a 5 year fixed rate deal, they will look at all the rates available and recommend according to the most cost efficient over the five years. It is crucial to take into account the lenders upfront fees, arrangement fees, booking fees, reversion rates (the rate you will be allocated after the 5 year ends), and any costs in changing your mortgage thereafter.   And, of course, ensure that you use an advisor that can access thousands of mortgages available, at the same time, to cost compare and save you traipsing around all the banks and building societies to see their individual offerings.

Watchdog also suggested that the average person changes their mortgage once every seven years!?  That was a shock to me.  Again, a reputable mortgage brokerage would seek to review mortgages a lot quicker than this.  Why would you stay on the lenders variable rate, after the promotional rate had ended, if there was a more cost effective rate available with another lender saving you money?  Always think of number one and show no loyalty.  You can be certain that lenders will not remain loyal to you when it comes to raising rates as we have witnessed with a number of recent increases in Standard Variable Rates.  Seek advice and save money!

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