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.”