Published: 21/04/2009

We are gradually starting to hear more and more people saying that they think we may be over the worst of the recession and that we might possibly have started on the long slow road to recovery.

House prices are still falling, but much more slowly, Estate Agents are reporting a sharp increase in the number of people looking at property and we’ve even started to see some aggressive mortgage marketing from lenders.<

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Last week we saw Halifax offering to pay up to £1,000 towards a borrower’s annual council tax bill under one of their new first time buyer mortgage deals and Alliance & Leicester announced some 3 and 4 year fixed rate mortgages without a lending fee. This is a marked change of attitude from the last 12 – 18 months where there has been little evidence that mortgage providers were proactively looking for new business.

Over the last two or three years we have seen mortgage fees soar and it’s not uncommon to pay £1,000 or more for these in some cases. So it’s no surprise that a few people in the media got quite excited by the ‘fee free’ offer, however a few minutes bashing the keys on the calculator soon revealed that perhaps the offer wasn’t quite what it was cracked up to be.

To illustrate this point, take a look at the examples below:

If you borrowed £150,000 over 25 years and fixed at 4.69% for three years with the new Alliance & Leicester fee free deal, your total repayments over the three years would come to £30,943.80.

On the other hand if you were to choose the mortgage on offer from HSBC at 3.99% with a £599 fee, your total repayments (including the fee) would amount to £29,373.80 over three years.

So even though you have to pay a £599 fee, the HSBC mortgage will save you over £1,500 on a £150,000 mortgage.

If you borrowed a smaller amount of £100,000 for 3 years with the Alliance & Leicester ‘fee free’ mortgage you would pay a total of £20,629.08.

But if you opted for the mortgage from RBS at 3.99% with a £499 fee, you would pay out £19,682.32 over the same term – a saving of £946.76.

As well as fee free deals, another area to be wary of is where the mortgage lender charges a percentage of the amount borrowed rather than a fixed fee. So whilst 1.5% looks and sounds a small number, if you were borrowing £120,000, the fee you would be asked to pay would be a staggering £1,800.

This just goes to highlight that headline grabbing deals are not always what they seem and that seeking professional advice when choosing a mortgage is essential as it can end up saving you a small fortune.

The best mortgage for one person may not be the best for another, the cheapest deal for you depends on a number of factors such as the amount you are borrowing, how many years your mortgage has to run, the interest rate, the fee and the length of any introductory or discounted deal that you are looking at.

By visiting the mortgage pages at the recently revamped moneynet website, you can get an idea of mortgage repayments by using our calculator, however if you’re looking for the best deal for your particular circumstances, just enter your borrowing requirements here and a mortgage advisor will search the whole market and provide you with the most competitive mortgage for you.

Shopping around for all your personal finance products is important, but because of the amount of money involved with a mortgage it is vital that you don’t pick the wrong deal or you could end up paying thousands of pounds more than you need to.

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