Yorkshire Building Society has launched a record low mortgage rate as competition increases but is it worth the high fees.
Mortgage rates have been at record levels for the last year and the Yorkshire Building Society has launched the lowest ever price of 0.89% deal but has a high £1,495 fee.
The record all time low mortgage rate has been confirmed by independent data provider Moneyfacts.
The deal is two-year discounted rate offering 3.85% off the standard variable rate (SVR) which is currently 4.74% and exposes the homebuyer to interest rises in the future.
The mortgage is available to first time buyers, remortgage buyers and home movers with a large deposit and requiring only 65% loan to value (LTV).
High fee to secure the mortgage
The record low price of 0.89% has an application fee of £1,495, a fee of £90 payable on redemption of the mortgage and a 1% penalty if you move before the end of the two-year term.
The mutual also offers a fixed rate mortgage of 0.99% with the same fee of £1,495 and with a 60% LTV so available to homebuyers that have a deposit of at least 40% of the property value.
Lower mortgage rates benefit buy-to-let investors and they may be prepared to pay higher arrangement fees as they can remortgage to reduce the cost of interest repayments to lenders.
If you are worried about interest rates rising in the future the fixed rate mortgage offers the security of fixed payments during the preferential rate two-year period.
James Farrow, of Yorkshire Building Society, said the cost of funding has fallen in recent weeks.
The mutual is financially strong building society with no external shareholders to satisfy, we have the ability to pass this on to borrowers.
How does it compare in the market
The low rates from the Yorkshire Building Society are impressive but how do the total costs including their application fee compare in the market?
For example, if your property is valued at £240,000 and you borrow £150,000 with a term of 25 years the payments with the mutual will be £588 per month.
This payment includes interest and capital repayment of the outstanding mortgage.
Over two years if the variable rate remains the same, the total payments will be £13,389 and the fee £1,495 or total cost of £14,884.
This is equivalent to a fee free two-year discount mortgage offering a rate of 1.79% or in the case of the mutual’s fixed rate mortgage, a fee free deal offering 1.89%.
This means first time buyers, remortgage buyers and home movers could find an equivalently costed or even cheaper two-year mortgages from another provider with a low arrangement fee or fee free offer.
The older equity release buyer, fixed rates can typically be secure from interest rates of 4.0% upwards without any evidence of earnings which is important for borrowers with only pension income.
For remortgage buyers at the end of your mortgage deal, avoid the lenders expensive variable rate and switch to a preferential rate to reduce your monthly repayment costs.
For equity release mortgage buyers, fixed rates can typically be secure from interest rates of 5.4% upwards without any evidence of earnings which is important for borrowers with only pension income.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.
Learn more by using the equity release calculator, mortgage monthly cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to maintain your lifestyle or even give to a family member.
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