In the Current Market a Secured Loan May be a Better Option.

Application fees on the best buy fixed-rate mortgage deals have nearly doubled in the past year, according to current analysis.

During the last 12 months the five most competitive two year fixed deals’ fees have increased from 998 to 1,500. Three year fixed deals’ fees have also increased from 575 to over 1,100.

If you go back to last October when the base rate was 5.75% the average two year fixed deal was at 5.68%. The base rate is now 5% but the 2 year rate is still 5.57%. Three year fixed rate deals are also more expensive compared to the base rate. They have gone down from 5.84% to 5.65% in the same period.

The recent, very high profile, problems in the banking and mortgage industry have meant that lots of people are jumping the gun a little and opting for the lowest interest rate deal they can possibly find. They should also consider the fees associated with these lower rate loans as when added together over a two or three year deal these are working out to be much more expensive.

People really need to consider seriously the cost of these fees. It’s too easy to just focus on the interest rate that’s been charged but especially in a shorter term deal they will have a serious impact on the true cost of the mortgage.

There are still many good deals out there for people with substantial deposits or equity in their home and strong credit ratings. Unfortunately many people will not be eligible for them as lenders are increasingly taking a tougher line.

Recent changes to the Consumer Credit Act and also the tightening of the financial markets which have restructured mortgage fees mean that possibly brokers and intermediaries should be pointing their clients towards a secured loan as it could be a much cheaper option than re-mortgaging the family home.

All secured loans for any residential purposes, under the new legislation, now come under the Consumer Credit Act. This means the client has to have a compulsory cooling off period. This has obvious advantages in that the client doesn’t feel under such pressure. If you also consider that with a secured loan there is no valuation fee, no conveyancing and no booking or application fees it’s pretty obvious that secured loans are a much better option in some cases than re-mortgaging. Even early repayment charges have a ceiling of two months interest (depending on when in the month the borrower informs the lender).

If your mortgage deal has some time to run and you’re tied in but you want to raise some capital or consolidate some other debts then looking at a secured loan could be a better option than a re-mortgage.You now have the added protection of the Consumer Credit Act, a lack of upfront fees to enjoy and of course much smaller early repayment charges and you’ve no need to contend with the ERPs on your current mortgage deal.