While base rates appear more competitive then six years ago, mortagage deals are not primarily as a result of inflated fees, according to money search engine Moneyfacts.
With another base rate rise anticipated in the short term, the market will just have time to come up for air before mortgage products are re-priced.
Moneyfacts conducted research into how today's best deals compare with when rates were last 5.50% in May 2001, and 5.75% in March 2001.
Base rates available today are as much as 0.47% lower than the comparable deals back in 2001, when the base rate was last 5.50%.
Julia Harris, mortgage analyst at Moneyfacts, says: “However this doesn’t tell the full story, as the mortgage fees on these deals are up to five times higher, and no fee deals are nowhere to be found within this selection of best rate mortgages.”
Looking at the best two-year fixed rate deals today compared with May 2001, on a £100,000 mortgage with a capital repayment over 25 years, the true cost over the two year deal period is over £800 more expensive. The best discount deal is also over £500 more expensive over the two-year term, according to Moneyfacts.
Not only have the deals become more expensive, so too has the revert-to rate. Today the Moneyfacts average standard variable rate is 7.32%, 0.36% higher than in March 2001 and 0.13% higher than when base rate was 5.75% in May 2001.
Harris says: “As competition in the mortgage market intensifies and demand for houses continues to grow, one would have expected the deals to become more competitive over time. While it could be argued that mortgage regulation has increased the costs of arranging a mortgage, this holds little water as the additional costs of the change should now have been absorbed, and it is difficult to see that it would amount to £400 a year for each borrower.
“With swap rates almost 0.90% lower in 2001, we would have expected rates to be much lower than those found today. The results illustrate a different picture, with rates today are lower or only fractionally higher, with the lenders seemingly using fees to compensate.
“Perhaps the increased competition and affordability crisis is having a detrimental effect on the best mortgage deals. As lenders become more creative in their product designs and the high fee low rate combination is commonplace, it is more important than ever, that borrowers compare the true cost of any deal when speaking to their lender or financial adviser."
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