Choosing the ‘cheapest’ mortgage could cost nearly £900

Written by Oliver Wade

Howeowners taking out a mortgage with one of the UK’s big six lenders could be paying almost £900 more by choosing the lowest rate deal, revealed online mortgage broker Trussle.

Trussle conducted a study and assessed the six big lenders lowest rate deals, often considered the most attractive by borrowers, and compared them to their best deals by true cost, including all fees and charges. The firm found that, in almost all instances, the lowest rate deal was not the most favourable among borrowers.

On 15 June, Nationwide Building Society’s lowest two-year fixed rate (1.54%) would have cost a borrower £14,213 over the initial two-year introductory period, when taking into consideration all fees and incentives. However, Trussle showed that the same homeowner could have saved up to £874 by choosing a deal from the same lender with a higher interest rate (1.94%), but with lower fees.

Commenting on this finding, Trussle CEO and founder Ishaan Malhi said: “The focus should always be on true cost - the interest rate plus associated fees - when comparing mortgage deals. Too often, borrowers are lured into making a decision based on headline rate alone and end up paying hundreds of pounds more in unexpected charges than they would on other available deals.

“The Big Six have a huge amount of influence and at the moment, they are contributing to the already confusing process of securing a mortgage. Something needs to change to give borrowers more transparency. It’s time that lenders, brokers and comparison sites start displaying true cost alongside deals. By making this information clearly available to homeowners, the market would become far more explicit and would work better for everyone as a result.”

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