Low rate but for a big fee – is it worth it?

November 30, 2014 by Brendan O'Neill

Rates

The last quarter of the year generally sees lenders promote eye-catching low interest rates, as they make a push to increase their market share. It is common knowledge that usually, a competitively low rate is accompanied by a sizeable booking fee, but will the reduced rate impact enough on your monthly payments to make paying the fee worthwhile?

The latest lender to make the headlines is First Direct, offering a two-year fixed at a phenomenally low 1.39%. What the borrower needs to factor in, however, is the booking fee of just under £2,000 and the 35% deposit, which are requirements of the product. The size of the mortgage would determine if it was worth paying such a large fee, as well as whether the house buyer had the budget for it.

First Direct is not the first lender to promote such a low rate; they have been slowly coming down over the summer months, especially when it comes to fixing for two years.

Working in the mortgage field, you will have undertaken the relevant CeMAP training and gained the necessary accreditation that enables you to help your customers by advising them on the best mortgage solutions.

As part of the interview process, you will support your customers to consider the total cost of any deal, and comparing the options; is it better to choose a slightly higher rate for a longer period of time, providing longer security, and a longer duration before potentially another booking fee becomes payable?