Spotlight On: Coventry's 2.49% two-year fixed rate mortgage

The deal

Coventry Building Society is offering a two-year fixed rate mortgage at an interest rate of just 2.49 per cent.

The good points

It's a great rate, especially with many experts predicting that interest rates will rise by the spring. Fixing now could mean making considerable savings in a few months. The booking fee is just £199.

The bad points

On top of the booking fee, customers will be charged an arrangement fee of 1.5 per cent of the amount borrowed. So a £200,000 mortgage will attract an outrageous £3,000 charge. On top of that, you need a minimum of a 40 per cent deposit to qualify for the rate. There is also a 4 per cent early redemption penalty over the two-year period.

Conclusion

This is a perfect example of an attractive headline interest rate behind which lurks what could be a very expensive deal. With a 5 per cent lock-in fee, there is no backing out once you are signed up – but don't be tempted. Instead, look for a higher headline rate with lower charges and you will end up better off over the long term.