Headline-grabbing mortgage rates have been coming thick and fast in recent weeks. It started with the first sub-1% deal in several years and has continued with lenders launching their cheapest home loans ever. As of last week, it’s been possible to tie-in for two years at just 0.94% or fix for five at as little as 1.06%. A number of providers have launched eye-catching sub-1% rates in recent weeks to tempt new borrowers. This indicates an appetite to lend from mortgage providers and reflects an ability to price low while we remain in a low interest rate environment. These best-buy rates are available to those with at least 40% to put down as a deposit, but there has also been a raft of price cuts at the other end of the market. Typically, the mortgages with the lowest interest rates will have fees attached. On the market-leading 0.94% deals offered by HSBC and TSB, the fees are no higher than were being charged on previous mortgages with higher rates. HSBC, which offers its deals to buyers and those re-mortgaging, charges a fee of £999, while TSB, which is offering its loan to re-mortgagors only, charges £995. However, on HSBC’s five-year fixed rate of 1.04% – available to its Premier account customers only – the fee is £1,499. Fees should be considered when you are deciding on a deal, and borrowers should not be swayed by a temptingly low rate alone. It is important to compare the different options and ensure they consider the overall, true cost of a new mortgage deal. Let’s compare HBSC’s 0.94% deal with one it offers fixed at 1.14% for two years which has no fee. Looking at the cost over the first two years of a 25-year mortgage, on loans of £458,000 and more paying the fee is worthwhile. Below that, the total sum paid is lower on the higher rate. The reality is that lots of people will add the fee to the loan, which means they will feel that less, but where this happens, the fee is accruing interest that will be repaid over many years.

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