Despite the Bank of England Base Rate continuing at a record low and
mortgage rates falling to record lows, millions of UK homeowners are
still finding it difficult to meet the criteria required to benefit from
some of the market leading mortgage deals.
Lending institutions continue to be criticised for
their stringent affordability criteria and also for increasing the high
fees that must be paid to secure some of the best rate deals. However,
some experts think that paying higher fees for lower interest rate deals
may actually be a good long-term solution, especially for some high net
worth mortgage clients. Keep reading to learn more.
High value mortgage clients can benefit from paying a higher fee for a better deal
The UK government’s Funding for Lending and Help To Buy schemes have
enabled high street banks, building societies and other lending
institutions to access cheap funding in return for their lending more
readily to private individuals and small businesses. However, opponents
of these schemes are of the opinion that they only work for those with a
substantial amount of equity in their homes already and they do not
help those whom they were designed to help i.e. first-time buyers
seeking a mortgage.
Figures reveal that average two-year
fixed-rate mortgages have fallen significantly for those borrowing 75
per cent or less of their new home’s cost. But borrowers who require 90
per cent of a home’s value are still paying more; in some cases up to 1
per cent more for their borrowing, ironically the people who can
arguably least afford it and who the government schemes were supposed to
help. All of this while some lenders are now offering some of their
cheapest-ever mortgage deals, with the proviso that the borrower can
meet the stringent affordability criteria.
However, the best deals are available to those mortgage clients who
have at least a 40 per cent deposit, or equivalent equity in their
current home. But although there are extremely attractive rates for
those with substantial deposits the associated arrangement fees have
been steadily increasing with some fees pushing 2,000.
Experts
are also warning those borrowers considering a fixed-rate deal,
especially one as short as 2 years, to check what the rate will be once
the fixed rate period expires. For example, some two year deals around
the 3 per cent mark will almost double after the end of the fix period
so dramatically increase the monthly repayment amount on the mortgage.
Mortgage deals with high arrangement fees but a lower rate may make
these products seem less attractive for borrowers with a small mortgage
but high value mortgage clients may actually benefit from lower rates
and higher fees over the life of the mortgage. So it is always essential
to look at the overall cost of the mortgage not just the initial
headline rate; take into account arrangement fees and the reversion rate
one any fixed rate period is over. These high value mortgage deals
show, more than ever, that high net worth finance clients should take
all the fees and charges into account when choosing a large mortgage.
