Mortgages Section

Beware of 'Too Good' Mortgage Deals

July 2005

We've long warned that financial companies have to be closely watched when they offer 'headline grabbing deals'. Many offers initially look great but the small print can often translate into far better business for the financial institution rather than for the client. And the present spate of mortgage deals is case in point.

Mortgage Deals - Fees Versus Interest Rates

The favourite trick now if vouge is for mortgage lenders to offer great interest rates but charge expensive fees and charges so wiping out the interest savings. Competition is very strong in the sector right now with the likelihood that UK rates are going to fall so banks are trying to outdo each other with ever lower interest rates.

But if you do your homework you'll find that in many cases a mortgage deal with a higher interest rate but lower charges/fees is far cheaper than a corresponding low interest rate/high fees mortgage.

Example - 4.39% Deal Beats a 4.29% Deal

At face value the 4.29% mortgage deal from the Skipton Building Society beats the Nationwide's at 4.39%
But for the fixed 2-year period (including all fees and repayments) with the Skipton you'd pay £14,150 but only £13,765 with Nationwide, a saving of £385 over 2 years
Where the Skipton loses out is fees, it charges a whopping £1,100

3% Mortgage Deals!

If you're offered a fixed-rate mortgage 2 year deal at 3% or less, even more homework is needs to be done
Usually deals such as these levy massive penalties if you want to remortgage sometime in the future
Companies to watch out for at present offering them are Portman BS, Saffron Walden BS, Northern Rock and Market Harborough BS

Summary

This proves one of the main points that the InvestorProfit.com site tries to hammer home every week, that being;

If you don't do some research and understand what you're buying then chances are at best you're going to overpay and at worst get ripped off. And this rule applies to pretty much anything you're buying, but especially financial products.

You can't blame the financial firms for trying it on, chances are we would as well if we were in control especially as our shareholders would demand blood if we didn't do everything to maximise profits. But instead of whining, it's easy to fight back because there are always some great deals available.

But these deals are normally strictly reserved for those who've bothered to research their markets and products.

UPDATED: Some more examples of what to look out for are;