Mortgage price war: Yorkshire BS launches new cheap fixed rates
Price war forcing mortgage rates down.
There’s something of a rate war going on in the mortgage market at the moment. Lenders are offering record low rates in a bit to grab the top spot in the best buy tables.
The latest lender to rejig its range and unveil some fantastic deals is Yorkshire Building Society. Let's take a look at what it's offering, and how the deals measure up.
Targeting buyers with small deposits
Yorkshire has launched a new mortgage deal aimed at buyers with just a 5% deposit.
The deal is a two-year fixed rate at 4.49% and comes with a £845 product fee. It’s available to both first-time buyers and those looking to move up the property ladder.
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How does Yorkshire’s 5% deposit deal compare?
Barclays' mortgage-arm Woolwich is offering first-time buyers a 95% loan-to-value (LTV) mortgage fixed for three years at 2.99% and no fee, so considerably less than Yorkshire’s deal, and it's fixed for longer too.
The catch is buyers need to take out a “Family Springboard Mortgage” and persuade a family member to put 10% of the property’s purchase price into a linked Helpful Start Account, which is a savings account. This enables Woolwich to offer lower rates in line with 85% LTV deals. After three years the “helper” gets their money back with interest, assuming all mortgage repayments are up to date.
For a more straightforward 95% LTV deal Hinckley & Rugby Building Society is offering a discount deal of 1.79% off the society' standard variable rate(SVR) for two years with an £800 fee. With Hinckley & Rugby’s SVR currently standing at 5.64% this means that you'll be paying a rate of 3.85%.
Although this rate is cheaper than Yorkshire's deal, there is a lot more uncertainty involved as an SVR can be increased at any time, irrespective of what's happening with the Bank of England's Base Rate.
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Top deals for bigger deposits
Yorkshire Building Society has also launched some new mortgage deals aimed at borrowers with bigger deposits.
These include a two-year fixed rate at 1.54% with an £845 product fee, and a three-year fixed rate at 2.24% also with an £845 product fee. To be eligible for these deals you need at least 25% equity in your property.
Other deals on offer include a very competitive two-year fixed rate at 1.29% for borowers with a 35% deposit. This deal comes with a £845 fee. Also at 65% LTV it’s offering a new two-year 1.59% fixed rate mortgage with a £345 product fee.
Two-year fixed rate price war
Yorkshire is more competitive when it comes to borrowers with a large deposit or equity in their homes than buyers with just a 5% deposit.
For example, its two-year fixed rate at 1.29% is hard to beat. HSBC is offering a two-year fix at the same rate but a much higher £1,499 fee.
If you have 40% or more equity in your property and you’re remortgaging (i.e. not moving home) you can fix for two years with Woolwich at 1.79% and no fee.
Doing the sums
It’s important to do the sums and take into account both rate and fees before choosing a mortgage deal.
Let's take the two-year fixed rates as an example. I want to take out a a £250,000 repayment mortgage over 25 years. At the end of the two-year fixed rate period, Yorkshire’s 1.29% deal would work out best, costing a total of £24,253 in payments and fees. HSBC would charge a total of £24,907 and Woolwich £24,822.
But Yorkshire’s two-year fixed rate at 1.59% would also work out cheaper than HSBC or Woolwich as a result of its tiny arrangement fee, costing £24,595 over two years.
It’s worth bearing in mind that the bigger your mortgage amount, the more important the rate, not the fee, becomes. If you had a £1 million mortgage you’d be better off paying a higher fee to get the 1.29% rate on offer, rather than opting for the low fee available on Yorkshire’s 1.59% deal.
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