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Fees mean borrowers beware

Yorkshire launches ‘lowest ever’ mortgage rate

Yorkshire Building SocYorkshire Building Society has launched a two-year fixed mortgage with the lowest ever rate of 1.07%.

However, this low initial rate changes to 4.99% after two years, giving an annual percentage rate (APR) of 4.5% over the full term of the mortgage.

It also comes with a fee with a payable total of £1,499, which is higher than the fees attached to many other two-year fixed deals. Customers also need a deposit of at least 35% of the property’s value.

Experts at Which? say the mortgage has an unprecedented rate; the lowest since Moneyfacts started recording rates in 1988.

But the high fees might make its actual cost less appealing. For a buyer borrowing £130,000 for a £200,000 home, the Yorkshire’s 1.07% mortgage is better than the average two-year fixed-rate deal, once arrangement and valuation fees are taken into consideration.

However, Which? says it is undercut by dozens of other offers, once all the fees and features of the mortgages are taken into consideration.

It notes that Chelsea Building Society is offering a deal with a higher rate of 1.54% (APR 4.9%) but its fees are less than a quarter of the Yorkshire’s, and it has a cashback incentive. Overall the true cost of Chelsea deal is £845 cheaper over the first two years.

 

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