Yorkshire Building Society has launched the market’s lowest ever five-year fixed rate mortgage for those with a 15 per cent deposit or equity in their home.
The deal is priced at 2.01 per cent, some 0.03 cheaper than its closest competitor, but comes with a hefty product fee of £1,995.
So is this deal actually the cheapest out there, or are the benefits of the low rate outweighed by the fees? We take a look.
Yorkshire’s new deal is fixed at 2.01 per cent but does come with a hefty product fee of £1,995
There are already plenty of cheap five-year fixes out there in this loan-to-value bracket. And though Yorkshire BS is right in saying its is the lowest rate, many other products come with significantly lower fees.
On a £200,000 mortgage taken over 25 years, a borrower on the Yorkshire deal would have monthly repayments of £848.68.
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M&S Bank has an 85 per cent loan-to-value deal at 2.04 per cent with a fee of £1,094.
The same mortgage on this deal would result in monthly repayments of £851.61, just a couple of pounds a month more expensive than Yorkshire’s.
However, over the life of the mortgage you would end up paying £725 more by taking the Yorkshire loan, because you are paying interest on a bigger fee over 25 years.
HSBC also has a similarly priced 85 per cent deal, at 2.09 per cent with fees of £999.
Monthly repayments on this product would be around £8 more per month than Yorkshire’s deal, but over the life of the mortgage would cost around £527 less.
TSB has an even cheaper deal at 2.09 per cent but with just a £695 fee. Again this would result in marginally higher monthly repayments but a saving of around £830 over the long run.
So while YBS’s new deal looks cheap and offers the lowest monthly payments, there are alternative options out there that will cost less overall.
For comparison, on a £200,000 mortgage taken over 25 years, Yorkshire’s fee-free 2.36 per cent option would result in monthly repayments of £883.20, some £34.52 more per month than its fee-inclusive rate.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: ‘This new deal from Yorkshire Building Society is likely to delight borrowers who are looking for a competitive rate with a trusted brand.
‘During times of economic uncertainty, borrowers may well be considering a long-term fixed mortgage for peace of mind.
‘This deal is currently priced as the lowest in its sector, but as with any deal, borrowers would be wise to work out the overall true cost of any mortgage before they commit.’
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