Thursday, September 29, 2005

Look out for mortgage rip-offs

By Cliff D'Arcy (TMFCliff) September 27, 2005

As the housing market comes off the boil, sneaky mortgage lenders are frantically looking for ways to keep the gravy train going. One way to lure in over-stretched buyers (especially first-timers) is to offer ultra-low interest rates. For example, you can fix your mortgage for five years at an annual rate as low as 4.39%, which looks pretty attractive at first glance!

However, with the Bank of England's base rate currently just 4.5% a year, a lender won't make much money from this deal. Hence, mortgage lenders have come up with ways to boost their profits by raising fees and other charges. Here are three tricks to watch out for!

1. Soaring arrangement fees
The majority of homebuyers or remortgagers (especially those who are over-stretched) probably don't look beyond the attractive headline rates on offer. However, they should, because the devil's in the detail, especially in the Best Buy tables!
Essentially, mortgage lenders are giving with one hand and taking away with the other. Those Best Buy headline rates are offset by rapidly rising arrangement fees, especially for remortgages. Indeed, taking additional fees and costs into consideration, it's unusual for the lowest headline rate to be the cheapest home loan."

These extra costs can now be quite significant for the property investor so take care to consider them when you are looking for a new mortgage.

Chris Bell

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6 Comments:

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