You are here: Home - Mortgages - First Time Buyer - News -

Borrowers misled by ‘best buy’ mortgage rates

Written by: Christina Hoghton
Headline mortgage rates are misleading many borrowers, with ‘best buys’ often costing thousands more than higher-rate deals.

The lowest-rate deals are often less attractive when all fees and incentives are accounted for, according to research by online mortgage broker, Trussle. In fact, they could be costing borrowers thousands of pounds more than deals with higher headline rates.

For example, Trussle worked out that the lowest headline rate on the market (a Santander deal at 1.09%) would cost borrowers almost £1,000 more over its initial two-year term than the lowest ‘true cost’ deal (a Danske Bank mortgage at 1.36%).

This is because of higher upfront costs on the lower rate deal. The study found that if the average borrower opted for Santander’s 1.09% deal, the mortgage repayments plus the total £1,534 upfront cost would cost them £13,759 over the two-year initial period. In contrast, Danske Bank’s 1.36% deal, with no additional upfront cost, would cost a borrower £12,800 over two years.

It’s the same with five-year fixed rates, said the online broker.

While Yorkshire Building Society’s 1.89% rate appears one of the best value deals on the market, it actually costs £1,300 more than the true cost of Nationwide’s five-year fixed rate of 1.99%, once all costs and incentives are taken into account.

‘Mortgage rates are overrated’

The report highlights the need to look at all the costs of a mortgage, not just the interest rate, and calls for the industry-wide adoption of a true cost calculation. It said that many of the lowest-rate deals on the market come with high upfront fees buried in small print, misleading customers.

Trussle added that 75% of homeowners agree that all charges and incentives on a mortgage deal should be rolled into one ‘true cost’.

Ishaan Malhi, CEO and founder of Trussle, said: “The way that mortgages are being displayed is at best inconsistent and at worst misleading. Borrowers are enticed into making decisions based on low headline rates rather than true cost, and can end up paying out more than they would on other available deals. Simply put, mortgage rates are overrated.

“From our research, we know that the vast majority of borrowers want lenders to roll all charges and incentives into a true cost figure, and we’ve seen just how useful it would be for people to have this figure to hand when they’re choosing a mortgage.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
energy bills
Ovo Energy investigated by regulator

Ofgem has launched an investigation into Ovo Energy relating to the accuracy of consumption figures given to some customers.