Caution Urged Over Low Rate - High Fees Mortgages

Buy-to-let landlords looking for competitively priced mortgage deals should look out for the "potential pitfalls" of low interest rate products, which comes with costly fees and charges, Moneyfacts has warned.

As the number of products marketed as low rate/high fee starts to grow, landlords are being urged to consider the impact a large fee can have on the overall cost of a mortgage.

The financial advice site said that a fixed-rate product at around 5.29 per cent with a high fee of 4,000 actually equates to a product that has an interest rate of about 5.73 per cent.

Senior analyst Alan Harper said: "While getting a low rate deal may appear an attractive option, it does come at a price and it's a price that's increasing all the time.

"Whatever the scenario, consumers should seek guidance from a qualified independent adviser before taking on a commitment of this kind."

According to the latest official figures, mortgage approvals fell by 16,000 in December, while net lending rose from 10 billion to almost 10.6 billion.

The quarterly inflation report and Consumer Prices Index (CPI) holds the key to whether interest rates go up this month, a mortgage expert has said.

Ray Boulger, from John Charcol, has said that although the markets have already factored in two more rate rises between now and summer, the Bank of England will already know the statistics from the quarterly inflation report and January's CPI report.

If the CPI shows a rise above the three per cent target, another 0.25 per cent increase is on the cards, he said.

Mr Boulger pointed out that house price inflation has already started to slow down because of recent hikes in the cost of borrowing, which suggests that a further rate rise would be unnecessary.

"On balance the odds seem to favour the bank rate being unchanged this month, but it will be a close call," he stated.

According to accountancy firm BDO Stoy Hayward, the strength of the UK's economy makes it more likely that rates will go up this month.