The battle for mortgage business is as intense as ever and today Yorkshire Building Society through its Chelsea brand has hit the market with a five year fix at a record low rate of 3.19% (max 70% LTV), however it does come with a chunky product fee of £1495.
Having crunched the numbers (based on a 25 year mortgage term), the new Chelsea five year fix is the top deal as long as you borrow more than £117,000 – anything below this figure then you’re financially better off with the Co-operative Bank courtesy of its 3.59% rate (to 75% LTV) with no product fee.
The low rate will certainly make a lot of headlines over the next few days, but once again it emphasises the importance of establishing the true cost of a mortgage (i.e. rate AND fee) and factoring in the term of your home loan.
To give you an idea of cost difference, if you’re looking to borrow £150k, the Chelsea deal including the big fee will cost you £45069 over the 5 year term, some £423 cheaper than the Co-op Bank fee free mortgage at 3.59%. The larger the amount borrowed, the less important the fee becomes, so for a mortgage of £300k for example, the Chelsea deal works out £2340 cheaper over five years.
If in doubt seek the help of a mortgage professional and get them to do the sums on your behalf.
If you’ve got 30% equity and have a mortgage requirement in excess of £117k this product in my opinion is a HIT, but for those looking to borrow less, the fee means that cheaper options are available.