MoneySavingExpert Chair, Martin Lewis · Editor, Marcus Herbert

# Four in 10 mortgages now fee-free - but don't get sucked in - MSE News

Posts: 418 Forumite
edited 27 July 2018 at 3:27PM
Forty per cent of mortgage products are now fee-free, according to data released this week - but simply taking a no-fee mortgage rather than considering the overall cost could leave you overpaying by £100s a year...
'Four in 10 mortgages now fee-free - but don't get sucked in'

Flag up a news story: news@moneysavingexpert.com
Get the Free Martin's Money Tips E-mail

• Posts: 1 Newbie
Not sure if I am missing something, but my maths works out that that the mortgage with the "eye-watering £2,034 fee" has a monthly repayment of £604 per month, not the £802 amount specified on the article. This places it at rank 2.
• Posts: 3,732 Forumite
edited 27 July 2018 at 6:45AM
Razium wrote: »
Not sure if I am missing something, but my maths works out that that the mortgage with the "eye-watering £2,034 fee" has a monthly repayment of £604 per month, not the £802 amount specified on the article. This places it at rank 2.

Too early in the morning to get my calculator out but I was about to say a similar thing. £334 difference in the fees plus 0.01% difference in annual interest rate can't possibly work out to a £200 per month increase over two years.

EDIT: It could possibly be that the £1,700 fee can be rolled onto the mortgage whereas the £2,034 fee has to be paid up front, or vice-versa. Though this makes for somewhat of a questionable comparison.
• Posts: 46,882 Forumite
One of the things that can get people sucked into the wrong mortgage is using faulty tools.

MSE mortgage calculator(s) get the wrong answers

because the Cost of fees and payment is not the correct way to compare what a mortgage really costs.

more on this later.

Two-year fix on a £150,000 mortgage (75% LTV), & 25-year-term*
Interest rate, Fee, Monthly repayment, Total cost over two years.
1.43% £1,700 £602 £14,443
1.89% £0,000 £628 £15,073
1.64% £0,534 £610 £15,100
1.54% £1,176 £607 £15,540
1.44% £2,034 £802 £16,240

It does not help there are errors in this table before we start on the real problem with the calculator.

As pointed out above the payment on No.5 is wrong(should be £603.76)
also
on the third option the the fees have not been added so the payment of £610 and total are wrong.

Now I am not sure on the table where the total cost comes from because it does not match the MSE calculator.
eg for No.4(1.54% £1176 fees) the calculator gets £14,578 NOT £15,540 (607*24=£14,568)

With 3 out of the 5 lines wrong that makes the order wrong.

These are the payments I get without adding fees, adding the fees and the total payments with the fees added
option, rate, fees, payment, payment added fees, total payments

1 1.43% £1,700 £594.98 £601.73 £14,441.44
2 1.89% 0000 £627.78 £627.78 £15,066.70
3 1.64% £0534 £609.82 £611.99 £14,687.82
4 1.54% £1,176 £602.73 £607.45 £14,578.87
5 1.44% £2034 £595.69 £603.76 £14,490.30

apart from the error ones these are close given there will be rounding.
Now the real problem

This has not taken account of the debt, different rates and payment pay off different amounts of capital

There are a number of ways to do this but lets start with a table that shows how much is owing after 2 years(when you add the fees) also show the interest paid over the 2 years and the real total cost, the money that does not pay off debt, the interest + fees.
option. Amount after 2, interest, interest+fees
1. £141,457.51 £4,198.95 £5,898.95
2. £140,431.12 £5,497.82 £5,497.82
3. £140,628.91 £4,782.73 £5,316.73
4. £141,105.52 £4,508.39 £5,684.39
5. £141,781.50 £4,237.80 £6,271.80

No.3 uses the least of your money to pay out real costs.
The amount owing on No.2 (no fee) is lower by £198 but that has £16*24=£284 more payments which makes the net owing on N0.3 lower when you count the cash still in the bank.

The method I use to account for the difference in payments is make the payment the same and see which mortgage leaves you with the smallest debt(after adding the fees)

option amount rate payment owing
1 £151,700.00 1.43% £627.78 £140,823.60
2 £150,000.00 1.89% £627.78 £140,431.12
3 £150,534.00 1.64% £627.78 £140,244.01
4 £151,176.00 1.54% £627.78 £140,610.42
5 £152,034.00 1.44% £627.78 £141,197.07

The winner is No. 3 1.64% with a £534 fee.
Close second(by £200) is the 1.89% with no fee

MSE. have just cost the consumer around £600 over 2 years recommending No1. which should be 4th on the list.

There may be other reasons the person wants/needs the smaller payment now and is prepared to take the hit on the finances in 2 years time.

(having a bit of a rant so I do hope I got these number right, if anyone can go over them and spot errors I can fix them. )
• Posts: 46,882 Forumite
edited 27 July 2018 at 12:49PM
The above sorts out the detail but before you start on that you do the simple sanity check

You use the best case scenario of interest only and the difference in rates and the difference in fees test.

fee, rate difference, interest saving over 2 years , net savings.

£1,700 0.46% £1,380 -£320
£0,000 0.00% £0,000 +£000
£0,534 0.25% £0,750 +£216
£1,176 0.35% £1,050 -£126
£2,034 0.45% £1,350 -£350

as a repayment mortgage cannot improve on that saving the only 2 in contention are the no fee and the small fee.

the others cannot save you money on a £150k mortgage over 2years
This discussion has been closed.

#### Categories

• All Categories
• 343K Banking & Borrowing
• 250K Reduce Debt & Boost Income
• 449.6K Spending & Discounts
• 235.1K Work, Benefits & Business
• 607.7K Mortgages, Homes & Bills
• 173K Life & Family
• 247.7K Travel & Transport
• 1.5M Hobbies & Leisure
• 15.9K Discuss & Feedback
• 15.1K Coronavirus Support Boards