Yorkshire Building Society mortgage has lowest rate ever But 1.07% two-year fixed-rate comes with large fee

22 May 2015

house with blue and yellow for sale sign in front garden

Yorkshire Building Society has launched a two-year fixed mortgage with the lowest ever rate of 1.07%.

This low initial rate changes to 4.99% after two years, giving an annual percentage rate (APR) of 4.5% over the full term of the mortgage.

However, the fees payable total £1,499, which is higher than the fees attached to many other two-year fixed deals. Customers also need a deposit of at least 35% of the property's value.

Here, our mortgage experts evaluate whether the Yorkshire BS deal may be worth snapping up. 

Yorkshire Building Society mortgage compared

The mortgage has an unprecedented rate; the lowest since Moneyfacts started recording rates in 1988.

However, its high fees might make its actual cost less appealing. For a buyer borrowing £130,000 for a £200,000 home, the Yorkshire's 1.07% mortgage is better than the average two-year fixed-rate deal, once arrangement and valuation fees are taken into consideration.

However, it is undercut by dozens of other offers, one all the fees and features of the mortgages are taken into consideration. For example, Chelsea Building Society is offering a deal with a higher rate of 1.54% (APR 4.9%) but its fees are less than a quarter of the Yorkshire's, plus it has a cashback incentive. Overall the true cost of Chelsea deal is £845 cheaper over the first two years. 

Find out more: Which? Mortgage Advisers - arrange a call with a mortgage expert

What to look for when comparing mortgages

David Blake at Which? Mortgage Advisers said consumers should be wary of selecting a mortgage purely based on the initial rate of interest it offers and encouraged consumers to look at the overall cost of a mortgage and reliability of the lender.

He said: 'People shouldn’t base their decisions solely on low headline rates as large fees can make the total cost of the mortgage uncompetitive, particularly for consumers who have small mortgage loans.

Which? Money Compare - mortgages - our tables are updated daily

Are cashback mortgages worth the reward?

The Yorkshire Building Society Group, which includes the Barnsley and Chelsea building societies, has launched a range of fee-free mortgages that also pay £1,000 cashback on completion.

Some of these products require a deposit of only 5% and may appeal to first-time buyers or buyers with small savings pots. 

However, with these mortgages, you should also consider the overall cost of the product rather than just the incentives. 

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