Mortgage choice improves

Sarah Davidson

October 8, 2012

Analysis by moneysupermarket claims rates on 2-year fixed mortgages have fallen from 4.21% in April to 4.05% compared to rates on 2-year tracker mortgages which have risen from 3.58% to 3.74%.

But the average total fees for a 2-year fixed mortgage rose from £1,170.50 to £1,370.16, a 17% increase since April and the price comparison site said many borrowers may find they are now paying more for their mortgage despite the fall in rates.

Clare Francis, mortgage expert at MoneySupermarket, said: “Attempts by the Bank of England to stimulate the economy to start lending again through its Funding for Lending Scheme has spelled some good news for borrowers. Our analysis shows there are now more mortgages available than six months ago, and fixed rates have been falling since April.

“However, this is masking the true picture of the total cost of a mortgage. While fixed rates have come down, arrangement fees have increased, offsetting much of the impact of lower rates, meaning it is not necessarily any cheaper to get a mortgage now, despite the funding initiative. It’s also worth noting that the average rates on tracker mortgages are higher than they were six months ago.

“When comparing mortgages borrowers should always look at the total amount they would repay, including fees, over the term of the deal.

“This is the only way to identify which product will be the best value. It’s also important to think about whether you want a fixed or variable rate deal, and if you do opt for a variable rate mortgage you need to ensure that you will be able to afford your monthly repayments if and when interest rates do rise as they won’t stay at this level forever.”

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