True cost of a mortgage deal
Compare two deals over their fixed period, fees included. The lowest rate isn’t always the cheapest deal.
The deals below are examples. Replace them with the ones you’re comparing.
Deal A has the lower rate, 4.80%.
Over the 2-year fix, Deal B costs £101 less, interest and fees together. The two cost the same on a loan of about £166,781. Below that, the deal with the smaller fee tends to win. Above it, the lower rate does.
Deal A: £15,186 over 2 years
Interest £14,187 plus fee £999. Monthly payment £787.
Deal B: £15,086 over 2 years
Interest £15,086 plus fee £0. Monthly payment £814.
Compares interest paid during the fixed period plus the fee. Leaves out other costs such as valuation or legal fees, cashback, and what happens after the fix ends. The money you repay off the loan isn’t counted as a cost, because it reduces what you owe. This is information, not advice. Two-year or five-year fix?