Headline mortgage rates are misleading borrowers and could be costing them thousands of pounds, according to Property Master.
It may initially seem that the cheapest rates offer the best value for money, but a higher rate could actually be the better choice once you have factored in fees and incentives.
The online broker’s latest Mortgage Tracker report, which follows a range of buy-to-let mortgages for an interest-only loan of £150,000, has looked at average product fees, with the research showing that these can start from a one-off charge of £621 for the average product fee for a two-year fixed rate mortgage for a typical amount of £150,000, based on the landlord borrowing 75% of the value of the property.
This fee rose to £1,065 if 50% of the value of the property was being borrowed, while the average product fee for a five-year fixed rate mortgage for the same amount when 75% was being borrowed was £745, but jumped to £1,212 if 50% of the value of the property was being borrowed.
Angus Stewart, Property Master’s chief executive, commented: “Understandably landlords will be attracted to the headline rates lenders quote but it is important also to factor in additional costs, in particular product fees.
“Landlords may also find other fees going under other names such as an application fee, or a booking fee or an account fee. When shopping around landlords need to make sure they have the full facts and the total cost in front of them.”
He continued: “With further rate rises on the horizon landlords coupled with a range of increased regulator and tax costs, landlords are becoming more aware than ever of the need to watch their finances. There are certainly good deals out there but make sure you know the all the costs involved before signing a new finance deal.”