NatWest has announced that it has released a new five-year fixed rate mortgage charging interest at just 2.95 per cent.
This is the lowest five-year fix that has ever been available in the UK and trumps HSBC’s similar product released earlier this month that charged 2.99 per cent and another product from Santander that is only available to existing customers.
The deal is only available to those with a 40 per cent or higher deposit and the arrangement fee comes in at an extremely high £2,495.
This means the deal is not such good value if you are borrowing less than £100,000 as the benefits of the low rate will be mitigated by the high fee, but if you are borrowing substantially more than £100,000 the deal represents excellent value for money.
One other bonus is that remortgages qualify for a free valuation and free legal fees.
Ray Boulger of leading independent mortgage adviser John Charcol said: “A fee of £2,450 will instinctively put some people off, but to put it in perspective a £2,495 fee on a 5 year fix is equivalent to the same annual amount over the deal period as a £999 fee on a 2 year fix.
“Furthermore, the rate on nearly all 2 year fixes and trackers (including NatWest’s) is higher than 2.95%! The larger a mortgage the better the value a borrower obtains by paying a high flat rate fee in exchange for a lower interest rate!”
Mr Boulger says that the competition is leading to a variety of competitive alternatives from other mortgage providers and that in contrast to the Project Merlin lending scheme, it looks like the Bank of England’s funding for lending scheme is proving effective.
“It is already clear that, in stark contrast to Project Merlin, the Funding for Lending Scheme is very quickly proving effective as far as the mortgage market is concerned,” he added.
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