Britain's mortgage lenders are not sure whether to cut or raise their rates either, with an increasing number now resorting to freebies to get would-be borrowers through their doors.
Last week, Scarborough Building Society began offering mortgage customers a free computer package including an iPod and iMac. NatWest and Nationwide hope to pull the punters with a promise of free money to borrowers with certain lenders if they cannot offer them lower mortgage repayments. Lenders will do just about anything to win business, including giveaways, paying customers' remortgage fees and pledging hard cash. Picking out the good deals from the gimmicks is far from easy.
Take Scarborough and its offer of hi-tech goodies worth £2,600 on completion of its MortgagePlus five-year flexible fixed and five-year flexible base rate tracker mortgage. John Carrier, Scarborough's chief executive, says: "These products are designed to reward our customers and reflect our commitment to innovation and making mortgages less boring." But excitement has a price: the rate on the fixed deal is 5.29 per cent, compared to Yorkshire Building Society's five-year flexible fixed mortgage at 4.49 per cent.
This mortgage may still be right for some customers. Ray Boulger, senior technical manager for the independent mortgage adviser John Charcol, says: "For mortgages at the lower end of the minimum loan required - from £50,000 up to £65,000 for the fixed-rate product and up to £100,000 for the tracker - this is good value." Rob Clifford, chief executive of Mortgageforce, says: "While it is not the very cheapest, the rate is decent. It's also refreshing to see the offer extended to fixed-rate borrowers."
Boulger points out that borrowers should ask themselves how much they really want the goods on offer. They should also work out how much any freebie could end up costing them.
The larger your mortgage, the more important it is to focus on getting the lowest-rate mortgage. For example, London & Country Mortgages says that, taking into account all the costs and benefits of the Scarborough mortgage, with the computer package, a borrower with a loan of £200,000 on 15 years would pay £94,762 over five years, compared to £92,882 with Yorkshire. Monthly payments on the Scarborough deal would be about £80 more than with Yorkshire.
Also, lenders are increasingly advertising keen headline interest rates, then adding massive arrangement fees to make up their profits. And, while remortgage deals that cover the cost of your fees look appealing, rates are typically loaded to allow the lender to recoup the cost of the "free" legal and valuation fees over the term of your home loan.
James Cotton of London & Country says: "Think about the overall cost of deals taking into account everything - the rate, freebies, cash back and free valuation or free legal work. An adviser will be able to help steer you through these calculations."
Remortgagers would do well to start their search for a new deal a few months before they want to switch. Whether borrowers are first-time buyers or on their fifth mortgage, they should also be unafraid to ask their mortgage adviser or lender to spell out exactly what they are and are not paying for and how.
Scarborough BS: www.scarboroughbs.co.uk; 0845 056 0855. John Charcol: www.charcolonline.co.uk; 0870 609 2108. Mortgageforce: www.mortgageforce.co.uk; 01332 258 666. London & Country: www.lcplc.co.uk; 0800 953 0304. Yorkshire BS: www.ybs.co.uk; 0845 120 0100
'The TV really does feel like something of quality for next to nothing'
Michael Horswood spent time researching the market when he remortgaged earlier this year and recognised Scarborough Building Society's five-year fixed mortgage offer as a decent rate at the time, of 5.49 per cent, but probably only the fifth cheapest available. However, with it came a Sony plasma TV worth £3,300. The Horswoods were looking for a relatively modest loan amount and the freedom to overpay. These factors, coupled with the ease of remortgaging to the society, with which Michael banked, meant they decided to go with the Scarborough and accept the TV as a handy bonus.
The 49-year-old electrician and father of two lives in York with his wife Linda and while he says the family were not exactly looking for a new TV, they are happy to have it now.
"I was happy with the offer and the service," he says, "and the TV really does feel like we've got something of good quality for next to nothing."Reuse content