The two-year fix is also the cheapest deal of its kind on the market at the moment – but is it the right one for you? Read on to find out…
What’s the deal?
Yorkshire has launched a mortgage deal priced at a fixed 1.18% until April 30, 2017. It sits top of the best buy tables in the two-year fixed rate camp.
You can apply for the mortgage whether you are buying your first home, moving to a new home, or staying put and just looking for a better mortgage. In any case you will need at least a 35% deposit to qualify (that’s a 65% loan to value).
The mortgage comes with a £1,369 product fee and a £130 application fee. Both can be added to the loan.
You can make penalty-free overpayments on the mortgage up to 10% of your remaining loan each year.
Who is it good for?
The rate on this deal may be super-low, but the fee is high. This means it would suit people with larger loans (after all, the bigger the debt, the more the rate matters). It also means the fee represents a lower proportion of the loan.
As the rate is fixed for two years, the deal would also suit those looking for some security of payments but in the shorter rather than longer term.
As we’ve mentioned, the most obvious catch is the high fees. Not only do they come to a combined total of nearly £1,500 but in two years’ time, you may have to fork out more fees again if you switch again to another mortgage deal.
There’s no doubt this is a great rate but it will need to be weighed up against the fee
At the end of the two years, the rate reverts to YBS’ Standard Variable Rate (SVR). Currently this is pegged at 4.99% which is also relatively high. It’s important then, to be ready to remortgage at the end of the two years. This is why:
If you borrow £100,000 over 25 years (and add the fees to the loan) the 1.18% mortgage would cost you £385 a month. Let the rate rise to 4.99%, and your repayments will ring in at £584 a month – that’s £200 extra to live in the same house!
If you want to pay off your mortgage before the two years are up, you’ll face an early repayment charge of 2% until April 30, 2016 and 1% the year following that.
Finally, really small loans won’t qualify. To get the 1.18% rate, you’ll need to borrow at least £25,001.
What’s the verdict?
There’s no doubt this is a great rate but it will need to be weighed up against the fee. Here’s how you do it:
-Use our mortgage calculator to get monthly repayment amount on the 1.18% deal for your circumstances
-Multiply that by 24 (or, as there’s a fixed end date to the deal, the number of months there is left remaining)
-Add on the £1,500 fees
Repeat with other mortgage options and you will be able to see whether paying a high fee to access a low rate makes sense for you.
Did you know?
This is Yorkshire Building Society’s lowest ever mortgage rate, but it’s not THE lowest ever mortgage rate. That accolade remains with HSBC, which last year, hit the market with a 0.99% deal. However, the rate was variable and the fee was even higher at £1,999.
Rates are getting better for those with smaller deposits too. Chelsea Building Society – the sister of Yorkshire – also launched a 1.49% mortgage to customers with a 25% deposit with a £1,545 fee, also over two years. Meanwhile, Santander has launched a two year fix at 2.19% with no booking fees for customers with a 20% deposit looking to buy or remortgage.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.