Andrew Hagger: Devil is in the detail of 'bargain' mortgage rates

Money Insider
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The Independent Online

There was more evidence this week that mortgage lenders are finally starting to pass on lower rates to borrowers.

Since the launch of its 1.99 per cent discounted deal at the beginning of this month, HSBC has seen a doubling of traffic to the mortgage section of its website. The rate is still available with reportedly seven out of ten applications currently being sanctioned.

Not to be outdone, high-street rival Woolwich this week came to the table with a one-year stepped tracker mortgage at just 1.98 per cent. However, before you go dashing off to sign up; there are a few terms and conditions to consider. The product, which is only available on mortgages of £200,000 or more, comes with a fee of £999 and a maximum 60 per cent loan-to-value limit.

At the end of the first year the rate reverts to Barclays Base Rate (currently 0.5 per cent) plus 2.49 per cent with an early repayment charge of 2 per cent of the balance payable until January 2013.

So, while the rate looks attractive with base rate at a historical low point, you will leave yourself vulnerable to any rate increases that may occur during the next three years.

Woolwich has also trimmed selected fixed rates by up to 0.4 per cent for those with a larger deposit, but there's a worrying trend of wider margins being charged on higher LTV mortgages.

For example, the new two-year fix from Woolwich, if you have a 30 per cent deposit, is charged at 3.99 per cent. Those with just 10 per cent less to put down will be charged 5.99 per cent, a huge 2 per cent premium.

With valuers reportedly erring on the side of caution, you could find yourself paying a lot more for your mortgage than you thought.

Savings latest

The fixed-rate savings market has been frenetic again this week and, although it was a blow for savers when West Bromwich Building Society pulled its range of market-leading deals, we have seen some competitively priced new products popping up in their place.

Yorkshire Building Society launched a table-topping 4.65 per cent, three-year fixed rate bond, which is available from just £100 and refreshingly isn't purely an online account, with telephone and branch applications both an option.

Aldermore is still top dog when it comes to a five-year fix at 5.4 per cent, but new accounts from Yorkshire Building Society at 5.3 per cent and Barclays at 5.25 per cent are now giving them a close run for their money.

It has been a bit of a mixed bag for variable rate savings, with Egg deciding to slash the bonus on its internet savings account by 0.75 per cent. As a result, new customers will receive just 2.5 per cent rather than the 3.25 per cent previously on offer.

On a brighter note Citi has launched the Citibank Flexible Saver paying 3.3 per cent AER from £1 although, as seems to be the norm these days, it includes a sizeable bonus element, in this case 2.25 per cent fixed for the first 12 months.

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