19 January 2010
A recent report has suggested that lenders may be pushing their more expensive mortgage deals onto consumers, with deals such as short term fixes, which are being pushed by lenders, proving to be costly for consumers. Many lenders are said to be focussing on pushing deals where rates are fixed for two years or less, and which tend to be the most expensive for consumers.
Many borrowers prefer to opt for a shorter term fix, as this means that they do not have to be locked into a particular interest rate for a long period of time. However, the downside to this is that those with short term fixed rate deals have to remortgage on a more regular basis, and with the fees and costs involved in this the costs can really add up and make this a very expensive option.
The average two year fixed rate deal costs around £1000 in arrangement fees, and this makes it unviable for those with smaller mortgages of less than around £100,000. Figures have shown that over the past nine months, with interest rates remaining at an all time low of just 0.5 percent the number of new mortgage products on the market have been increasing and many of the new products that have been coming onto the market have been two year fixed rate deals.
Tags: Financial services, Mortgage loan, mortgage, UK mortgage terminology, mortgage brokerMichael White, a mortgage broker, stated: ‘Fixed rates have come down, but they’ve hardly been slashed. They needed to be lowered because they are not as competitive as equivalent tracker deals. If borrowers believe interest rates are set to stay low, then a two-year tracker at under 4% looks a lot more attractive than a two-year fixed rate at more than 5%.’