Halifax is offering a two-year fix with an ultra-low rate of 2.99 per cent to those with a deposit of at least 40 per cent. However, while this may appear to be a best buy on the face of it, when you dig a little deeper it starts to look less attractive because of an arrangement fee of 2.5 per cent of the loan size. It therefore works out more expensive than other fixed deals with higher rates.
For example, someone taking out a £150,000 25-year repayment mortgage would pay £20,959 over the two-year term if they opted for Halifax's fix at 2.99 per cent (and £3,750 of that would be the cost of the arrangement fee). However, if they opted for Leek United Building Society's two-year fix at 3.59 per cent with a £799 fee, they'd pay £19,179 over the two-year term – £1,780 less.
This shows how important it is to avoid being blinded by the headline rate and to take time to check what fees are being charged. Sometimes a higher rate could actually work out better value over the term of the deal.