With many top mortgage offers coming from mutuals rather than major banks, it re-emphasises the point that high-street lenders, while more accessible, are not necessary the only or best option. Prospective homeowners or remortgage customers may benefit from drawing up a shortlist of all the local lenders situated within a sensible radius of their property and comparing their less-publicised but highly competitive deals. Check out some of these below.
60% / 65% LTV
The Norwich & Peterborough Building Society has reduced its low-fee 2-year fixed-rate mortgage to just 1.94% at 65% LTV, offering one of the most deceptively competitive deals in the low-risk mortgage sector.
This deal appears to be convincingly outperformed by a multitude of other lenders, with headline rates in this sector coming in up to half a percent cheaper (e.g. West Bromwich BS, 1.48%).
But the fees demanded for these products are much higher – often in excess of £2,000 – which makes the Norwich & Peterborough, with its modest fee of just £195, far more attractive than it initially appears.
Take, for example, the Post Office’s 2-year fix at 1.63% (max. 65% LTV). By rate alone, this undercuts the Norwich & Peterborough mortgage by more than a quarter of a percentage point. But the Post Office’s hefty fee of £1,995 adds an extra £900 per year over the term.
Customers only stand to benefit from the “cheaper” Post Office mortgage where the loan is so large that the lower rate generates a saving capable of offseting the higher fee. But at £900 a year, that’s an awful lot to make up. Even on a £200,000 mortgage, the Norwich & Peterborough deal proves to be almost £1,100 cheaper over the two-year term.
Our guide to mortgage arrangement fees offers an example of how favourably this N&P mortgage compares to larger rivals.
Homebuyers required an average deposit level of 20% last year, according to the Council of Mortgage Lenders. So it’s little surprise that lenders are keen to compete in the 80% LTV sector.
The Furness Building Society has followed its new 90% LTV mortgage last week by offering a market-leading mortgage deal up to 80% LTV.
The society’s new discounted variable rate is available at just 2.10% for two years – the lowest in this sector – with a fee of £999.
Those interested in remortgaging a property with the Furness deal will also receive an appealing incentive package which includes free valuation and legal fees.
Again, the negotiation between rates and fees is important, as products with a higher rate and lower fee may influence the best deal at 80% LTV over this term.
The Nottingham Building Society is offering a two-year discounted variable rate deal from 2.29% with a £999 fee, while a lower-fee option is also available at 2.54% (£199).
Both mortgages are currently available as fixed-rate deals at the same term. The mortgages all come with a free basic valuation, while remortgage customers also receive free legal fees.
On a £200,000 mortgage, the Furness deal will beat both of the Nottingham deals on price by at least £250. But as the mortgage value falls, the more competitive the Nottingham deal becomes. By the time the loan reaches £150,000, the lower-fee (2.54%) Nottingham deal begins to undercut the table-topping Furness mortgage over the 2-year term.
As both of the Nottingham offers are currently available as fixed-rate deals, this also offers protection against rate rises over the next two years.
First-time buyers in the Midlands would do well to note a strong offer from the Loughborough Building Society on 90% LTV mortgages.
As part of its latest review, Loughborough has slashed the rate on its first-time buyer mortgages by up to one whole percentage point, allowing the mutual to outgun its big-name competitors.
The 3-year discount mortgage at 90% LTV has been cut to just 2.99% – the lowest rate on the market for this sector.
The fee of £399 is also well below the average for rival products, making this a very appealing package overall.
An attractive alternative in this sector is the 3-year fix from TSB, at 3.34% with no fee. A quarter-point increase in the central interest rate over the next three years would bring the cost roughly in line with the TSB deal. Any more than this, however, and borrowers may regret having passed on a fixed-rate option.