Can Mortgage Borrowers Take Advantage of Headline Deals?

Despite the Bank of England Base Rate continuing at a record low and mortgage rates falling to record lows, millions of UK homeowners are still finding it difficult to meet the criteria required to benefit from some of the market leading mortgage deals.

Lending institutions continue to be criticised for their stringent affordability criteria and also for increasing the high fees that must be paid to secure some of the best rate deals. However, some expertsthink that paying higher fees for lower interest rate deals may actually be a good long-term solution, especially for some high net worth mortgage clients. Keep reading to learn more.

High value mortgage clients can benefit from paying a higher fee for a better deal The UK government’s Funding for Lending and Help To Buy schemes haveenabled high street banks, building societies and other lending institutions to access cheap funding in return for their lending more readily to private individuals and small businesses. However, opponents of these schemesare of the opinion that they only work for those with a substantial amount of equity in their homes alreadyand they do not help those whom they were designed to help i.e. first-time buyers seekinga mortgage.

Figures reveal that average two-year fixed-rate mortgageshave fallen significantly for those borrowing 75 per cent or less of their new home'scost. But borrowers who require 90 per cent of a home's value are still paying more; in some cases up to 1 per cent more for their borrowing, ironically the people who can arguably least afford it and who the government schemes were supposed to help. All of this while some lenders are now offering some of their cheapest-ever mortgage deals, with the proviso that the borrower can meet the stringent affordability criteria.

However, the best deals are available to those mortgage clients who have at least a 40 per cent deposit, or equivalent equity in their current home. But although there are extremely attractive rates for those with substantial deposits the associated arrangement fees have been steadily increasing with some fees pushing £2,000.

Experts are also warning those borrowers considering a fixed-rate deal, especially one as short as 2 years, to check what the rate will be once the fixed rate period expires. For example, some two year deals around the 3 per cent mark will almost double after the end of the fix period so dramatically increase the monthly repayment amount on the mortgage.

Mortgage deals with high arrangement feesbut a lower rate may make these products seem less attractive for borrowers with a small mortgage but high value mortgage clients may actually benefit from lower rates and higher fees over the life of the mortgage. So it is always essential to look at the overall cost of the mortgage not just the initial headline rate; take into account arrangement fees and the reversion rate one any fixed rate period is over. These high value mortgage deals show, more than ever, that high net worth finance clients should take all the fees and charges into account when choosing a large mortgage.