Research from Trussle states that choosing a lowest rate mortgage with one of the UK ‘s big six lenders could cost borrowers nearly £900 more a year than is necessary.
The online mortgage broker compared each lender’s lowest rate deals with its best deal by ‘true cost’ – that is, accounting for all fees and charges, and claims that the latter deal almost always came out on top.
For example, Trussle says that Nationwide’s lowest two-year rate, at 1.54 per cent, would set a borrower back £14,213 inclusive of all costs over the fixed period. However, choosing the higher rate two-year fix at 1.94 per cent, the broker says, would leave the borrower only £13,339 lighter of wallet over the same time period.
The mortgage broker says that the story repeats across all six big (Lloyds Bank, Nationwide, RBS, Santander, Barclays, HSBC), with the average difference between each lender’s lowest two-year fixed rate deal and its best value deal coming in at £430.
In response, a Nationwide spokesperson comments: “Those looking for a larger loan may benefit more from a mortgage deal with a higher fee and lower interest rate, due to the overall amount of interest they save, while customers with smaller loans may not save enough interest to recoup the cost of the fee. This is where customers may benefit from the mortgage advice process to find the product that best meets their particular needs.”
Trussle founder and chief executive Ishaan Malhi says: “Too often, borrowers are lured into making a decision based on headline rate alone and end up paying hundreds of pounds more in unexpected charges than they would on other available deals.
“Something needs to change to give borrowers more transparency. It’s time that lenders, brokers and comparison sites start displaying true cost alongside deals. By making this information clearly available to homeowners, the market would become far more explicit and would work better for everyone as a result,” he adds.