Am I missing something re these rates?

bclark

I am looking at two different rates that Nationwide have for current account customers and I am confused as one seems so obviously better than the other.

They are both 4 year fixed rates as follows:

2.59% with a £999 product fee - cost per month for what we want to borrow = £511.62

2.89% with no product fee - cost per month for what we want to borrow = £524.73.

Now the way I see it the second mortgage will work out £629.28 more expensive over the 4 year period but that is balanced out by not having to pay a £999 fee for it.

Am I missing something obvious here as I cannot see why people would chose the first product?

dotdash79

The headline amount might be different however the one with a product fee might allow overpayments, or have an higher LTV.

bclark

dotdash79 wrote: »

The headline amount might be different however the one with a product fee might allow overpayments, or have an higher LTV.

No they both allow overpayments up to £500 a month and both have the same LTV. They also both have the same incentives for taking them out.

hamster2013

if those rates have the same t&c, then you are not missing anything
it would seem that you are not borrowing that large a sum, as if i were to apply those rates to what I am borrowing, it would make a monthly difference of £43, therefore, over 4 years that would represent over £2000, so i'm better off paying the £999 fee

bclark

hamster2013 wrote: »

if those rates have the same t&c, then you are not missing anything
it would seem that you are not borrowing that large a sum, as if i were to apply those rates to what I am borrowing, it would make a monthly difference of £43, therefore, over 4 years that would represent over £2000, so i'm better off paying the £999 fee

Ah ok fair enough, now you say that I suppose with a larger sum it would be worthwhile.

At least I know that for my figures the decision is quite obvious and I am not missing something silly.

Thanks.

kingstreet

Big mortgage = higher saving from better rate, lower impact of fee.

Smaller mortgage = lower saving from better rate, higher impact of fee.

Horses for courses.