Nearly half of mortgages are now fee-free, as lenders compete to attract borrowers who are looking to keep their costs to a minimum.
There are now 274 more fee free deals than there were at the start of the year, according to research by Moneyfacts.co.uk, which is good news for homeowners and buyers who don't want to pay large up-front costs. It brings the total number of mortgages without an arrangement fee to 2,007, equivalent to around 40% of the mortgage market.
Why the number of fee free deals is rising
Although some lenders have reduced their mortgage rates recently, they can't go much lower, and so are increasingly moving away from competing on rate, by offering incentives such as fee free deals and cashback.
These incentives are available on all types of mortgage, including five-year fixed rates, which means those looking for longer term security following the recent interest rate rise can also benefit.
Bear in mind, however, that when a deal is advertised as fee free, this usually refers only to the arrangement fee, so there could still be valuation and legal fees to pay. That said, some lenders provide mortgage deals with no set up costs at all, so there are lots of different options for homebuyers to choose from.
Look at the overall cost
When deciding which mortgage to go for, homebuyers must remember that if a deal is advertised as fee free, it doesn't necessarily mean it will be cheaper than a deal with an arrangement fee.
Fee free deals often carry higher rates, whilst the mortgages with the lowest rates typically charge the highest arrangement fees. It's therefore important to weigh up the overall cost of any deal before deciding which is most cost-effective.
As a general rule, if you're taking out a smaller mortgage, it may be cheaper to choose a deal with a slightly higher rate but lower set up costs, whilst if you're borrowing a larger amount, you may pay less overall if you go for a deal with a lower rate but higher step up costs.
There's a huge range of mortgage rate, fee and incentive combinations available, so whatever your requirements, you should be able to find a deal to meet them. Just remember to look at the whole package on offer, rather than basing your decision on the rate alone.
If you're looking for a fee-free mortgage deal, speak to L & C about the various mortgage deals available.