Analysis by MoneySupermarket has found there is a big difference between the fees attached to similarly priced mortgages from banks and building societies.
The comparison site said that, overall, building societies come out on top with much lower arrangement and booking fees which could save consumers over £700 over the term of the mortgage deal. There is a similar situation with five-year fixed rate mortgages, although banks are offering a lower average interest rate at 4.62% when taking into account the higher fees, consumers could be saving more than £200 if they went with a building society.
However, banks beat mutuals when it comes to the cost of mortgages specifically for first time buyers. The difference between the top rate for a two-year fixed mortgage with a 90% LTV from First Direct and Chelsea Building Society is 0.2% but when the fees are factored in, there is an overall saving to be made of £1,000 by going with First Direct. This is more marked with five-year fixed rates where opting for NatWest’s mortgage rather than that from Chelsea Building Society could result in a saving of £3,500 over the term of the deal.
“When looking for a mortgage, don’t just go to the big banks as there are some great deals available from smaller lenders too and it’s really important to get the best product as it could literally mean the difference in cost of thousands of pounds,” said Clare Francis from MoneySupermarket.com.
“What’s more, the deal with the lowest rate of interest won’t necessarily work out to be the cheapest. This is because set up fees can have a significant impact on the overall cost of a mortgage and they vary considerably.”
Francis added: “It can work out cheaper to opt for a product with a higher rate in return for lower set up costs – it will depend on the size of the loan. Therefore when comparing mortgages you need to calculate the total amount you’ll pay over the term of the deal – monthly repayments plus fees – in order to work out which will be the best value for you.”