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cashinmattress

I Was Better Off Paying A Higher Rate And Lower Fee

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The housing market is recovering and there are more mortgages at rock bottom rates than at any time since the start of the financial crisis. But that doesn’t mean that you should take the first decent-looking deal you are offered – there are still plenty of traps for the unwary. (um, no it isn't)

Exceptionally low mortgage rates – two-year fixed rates of less than two per cent, for instance – are increasingly accompanied by upfront fees that can top £1,000.

This makes it crucial for borrowers to do their sums. Where mortgages are large, the lower rate may work out best. Where smaller loans are concerned it probably won’t.

...

Problem is that most folk can't do their sums.

Exceptionally low mortgage rates eh? What about exceptionally high asking prices?

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I spotted this trap when we last remortgaged, the lower rate but higher fee meant we'd pay more than the higher interest rate but no fee. I wouldn't have saved anything.

Edited by interestrateripoff

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I spotted this trap when we last remortgaged, the lower rate but higher fee meant we'd pay more than the higher interest rate but no fee. I wouldn't have saved anything.

Basic lack of maths skills are the reason that banks are able to get away with these misrepresentations. All anyone needs to do is load up the Loan Amortizer template in Excel and type in 4 numbers to understand the difference with and without fees at different rates. It doesn't take a rocket scientist. Yet people expect their bank to be looking out for their interests - when does a salesman do anything except look out for the next sale???

You can't legislate for stupidity or ignorance no matter how much you regulate the banks if you have cattle as customers you can pretty much get them to agree to whatever you want. Making banking actually "helpful" would require

behavioural change at banks -

removing all sales targets and bonuses for more sales

Recognition that banks are NOT real businesses

Banks are simply a utility used to transfer credit and fractional reserving for the capitalist system i.e they can never go bust and they can never excel at RoE they are simply a steady hand on the economy controlled by the Bank of England to regulate the supply of money. They are privatised to create some incentives but these should also be tightly controlled by the BoE dependent on the money supply they want in the economy according to the business cycle.

I saw an on the guardian last week trying to get more basic "life skills" into class rooms e.g investments and mortgages. I believe that any banker would literally pay money to stop something like that. If people actually knew that taking 1-2% as a fee too look after your pension actually destroys half your savings they would be up in arms. The same goes for mortgage fees added on to higher/ lower rates and the requirement to constantly re-fix your mortgage every few years to get a good rate rather than the 15/30 year fix the US has created.

As Nigel Lawson argued BANKS ARE NOT BUSINESSES!

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Great deal book now while stocks last......mortgage 2% fixed for six months fee £999...loans up to £100,000. ;)

Edit:.....No problem you can add the fee onto the loan.

Edited by winkie

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  • 239 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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