Warning over lowest ever mortgage rates

Meanwhile, number of households with mortgage arrears falling as repossession figures drop

Click to follow
The Independent Online

Mortgage rates have fallen to an all-time low and the number of products available has increased by 37 per cent, according to MoneySupermarket.

But their figures suggest that lower rates are not always the best deals available since average fixed rate mortgage fees have risen 17 per cent since June 2012 and tracker products by nine per cent.

Since June 2012, the number of two-year fixed products has risen from 356 to 848 while the average rate has fallen 0.89 per cent to 3.56 per cent. However, the application fees on two-year fixed rate mortgages have increased by 30 per cent in the same period, to an average of £1,033.

"It's a great time for mortgage borrowers," said Clare Francis, mortgage expert at MoneySupermarket. "However, the thing to watch out for is the set up costs. Some of the lowest rates have very high fees. It's very easy to be attracted by low headline rates when looking at mortgages, but you must also factor in the fees you'll be charged to take the mortgage out. Set-up costs can vary greatly between providers so taking the time to work out the total amount you have to repay over the term of the offer is essential."

Meanwhile, the Council of Mortgage Lenders (CML) today released figures showing the lowest number of repossessions since 2007, with 7,700 repossessions in the last three months of 2012. Overall, repossessions fell from 37,300 in 2011 to 33,900 in 2012.

Their statistics also indicate that the number of households with mortgage arrears also fell, with 157,900 households at the end of 2012 in arrears of 2.5 per cent or more of their mortgage balance, compared with 161,400 households at the end of 2011.

CML director general Paul Smee said: "The fall in arrears and possessions is obviously very welcome. Households fall into difficulty for a variety of reasons, most of which cannot be anticipated. Wherever possible, lenders will work with borrowers to manage periods of temporary financial difficulty and enable them to keep their home. Anyone worried about their situation should talk to their lender, who will try to help them."