Residential mortgage numbers have reached a new high and of these 40% are offered without arrangement fees from lenders.
The latest report from Moneyfacts shows the number of residential mortgages products has increased to a new high since March 2008 of 5,035 with almost 40% fee free from lenders.
There are now 2,007 fee free mortgages as lenders reluctant to decrease interest rates look for ways to make their offering more attractive by removing arrangement fees.
Lower mortgage rates benefit buy-to-let investors as they can remortgage to reduce the cost of interest repayments to lenders.
This is also good news for first time buyers, home movers and remortgage buyers giving them the opportunity to reduce the cost of home ownership.
Rising number of mortgage deals
The number of residential mortgage deals has steadily increased with 244 more in the last month alone with 274 more fee free deals since the start of the year.
The following table from Moneyfacts shows the total number of residential mortgages and proportion of fee free deals.
| Year | Mortgages Fee Free | Proportion |
|---|---|---|
| Jul-16 | 3,848 | 33% |
| Jul-17 | 4,747 | 36% |
| Jan-18 | 4,560 | 38% |
| Jul-18 | 5,018 | 40% |
There are now 2,007 fee free deals representing 40% of the market which has reached a new high of 5,018, the highest since March 2008 when there were 6,192 residential mortgages.
For remortgage buyers currently on their lenders standard variable rate, switching to a new mortgage deal would help them to reduce the cost of monthly repayments.
Charlotte Nelson finance expert at Moneyfacts said, the extra products on the market seem to have had little to no effect on average rates, with the average two-year fixed rate unchanged at 2.52% this month.
Fixed rate deals are selected by 82% of borrowers including first time buyers, home movers, remortgage buyers and buy-to-let landlords given the very low rates at the moment.
Low interest rates are not always cheapest
Lenders often reduce arrangement fees to zero to compensate for a lower mortgage rate as they don’t want to offer unsustainably low rates if the Bank of England raises rates.
By aiming to secure the cheapest rate deal, borrowers could be missing out on offers that may be more cost-effective in the long run.
For lenders with arrangement fees, the average cost has increased from £979 to £990 so its important to calculate if the higher upfront cost could nullify the lower monthly repayments.
Charlotte Nelson said, a borrower with £200,000 mortgage for 25 years 2-year fixed rate and 75% loan to value would be £1,131.80 worse off compared to someone opting for the lowest deal without a fee.
Low interest rates of under 4% have benefited equity release mortgage buyers accessing wealth in their property to consolidate debt, gift to a family member or pay university fees for grandchildren.
What are your next steps?
Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to improve your quality of life, for home improvements or pay for care at home.
Learn more by using the mortgage cost calculators, property value tracker chart and equity release mortgage calculator. Start with a free mortgage quote or call us and we can take your details.
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