Two ways in which the cost of your new mortgage is lower than this time last year

Posted 25 March 2015

Over recent weeks there have been plenty of news stories about how mortgage rates are falling and how cheap it is to borrow. Now, new research has found that not only are mortgage rates cheaper than they were a year ago but the fees charged by lenders have also tumbled.

Indeed, lower fees on mortgage deals are having the effect of knocking another 0.07% off the cost of borrowing.

Mortgage rates continue to fall

New research from a leading data analyst has revealed that the average cost of two-year mortgage deals has hit another record low. Moneyfacts has found that the average cost of a two-year fixed rate deal now stands at 3.06%, down from 3.14% in February. Over the last year the average rate has fallen from 3.51% to 3.06%.

The average variable rate remained the same at 2.11%, the lowest rate ever recorded.

Average fee falls by over £100 in the last year

While mortgage rates are continuing to fall, Moneyfacts has revealed that the fees charged by lenders have also come down over recent months.

The overall average fee decreased from £697 to £688 in the last month with the average fixed fee falling to £682 (down from £687) and the average fee for variable-rate mortgages dropping from £727 to £706. In the past 12 months, the average mortgage fee has reduced by £128, falling from £816 to the current level of £688.

A win-win for borrowers

Generally it is unusual for both mortgage rates and fees to be reducing and so this data suggests that it is, as Moneyfacts says, “a golden age for borrowers”. Using a £150,000 repayment mortgage as an example, Moneyfacts’ calculations show that the overall fee reduction of £128 actually equates to an additional 0.07% drop in rate. This means the decline in fee has had the same effect as the average rate falling to 2.99%, had fees remained unchanged.

Keith Osborne, editor of, says: “It is rare that both fees and interest rates fall at the same time and so this analysis is great news for anyone looking for a new mortgage. Strong competition between lenders is certainly driving a reducing in rates but increased knowledge and sophistication amongst borrowers is helping to reduce fees. Consumers increasingly understand the important role that fees play in the overall cost of borrowing, and so many are shunning deals with very high fees as they simply aren't competitive.”

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