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Why a lower interest rate does not always mean the best mortgage

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Homeowners and buyers’ obsession with the lowest possible mortgage interest rates is leaving them susceptible to thousands of pounds in unexpected costs.

Most borrowers are focusing on enticing rates and overlooking fees and early repayment charges when selecting a mortgage, according to the latest research from Legal & General Mortgage Club.

Nearly two thirds of UK borrowers consider the interest rate to be the most important factor in choosing their next home loan, according to L&G.

Only 13 per cent of borrowers see early repayment charges as being important to consider when getting their next mortgage, according to research from L&G

Only 13 per cent of borrowers see early repayment charges as being important to consider when getting their next mortgage, according to research from L&G

But only 13 per cent of borrowers see early repayment charges as important, meaning they could face thousands of pounds in extra costs if they wish to move to a new product before their existing fixed deal ends.

A borrower locked into a five-year fixed rate deal on a £250,000 mortgage, who then decided to move or remortgage before the five years is up, could face £10,891 in early repayment charges according to L&G analysis.

‘Our latest research shows why it is important to look beyond the headline rate and consider other factors, like exit charges,’ says Kevin Roberts, director at L&G Mortgage Club.

‘Not doing so could mean having to pay thousands in unexpected costs when the time comes to move home or remortgage.’

Remortgaging prior to the initial fixed rate deal ending will usually result in an early repayment charge, which often ranges between one to five per cent of the outstanding mortgage amount.

Early repayment charges can be a serious issue for those looking to move home before their fixed rate deal comes to an end.

‘With Covid-19 changing the way we want to live and the stamp duty holiday offering a financial incentive, we’ve seen a huge increase in housing transactions over the last year,’ says Daniel Hegarty, chief executive of online mortgage company, Habito.

Early repayment charges often range between one to five per cent of the outstanding mortgage amount, and can be a serious issue for those wanting to move

Early repayment charges often range between one to five per cent of the outstanding mortgage amount, and can be a serious issue for those wanting to move

‘Unless timed perfectly with the end of their current mortgage’s fixed-rate deal, many of these buyers will have faced charges from their lenders to be released from their current mortgage early.

‘For some buyers, this will be a price worth paying to get their new dream home, but for others, it will have come as a nasty shock, or worse still completely sabotaged their plans to move.’

Lenders often allow borrowers to move their mortgage to another property without fees, in what is known as ‘porting’ – but this doesn’t work for everyone. 

It can be problematic for home movers who may require a new mortgage in order to fund the purchase, whether they be upsizers requiring a bigger loan or downsizers looking to pay off some of the outstanding balance.

There may also be an issue if a home mover’s circumstances have changed.

‘With porting, you generally do not have to pay early repayment charges,’ says Sykes. ‘However, you still have to satisfy your lender’s requirements at the time of the new application.

‘For example, if you have since become self-employed your current lender may not accept your new mortgage application.

‘If you can’t therefore port the mortgage, you have to pay the early repayment charges and remortgage with another lender.’

There are ways to avoid these charges and give yourself greater flexibility to change mortgage as and when you need, according to Sykes.

‘Fixed-rate deals may be most peoples preferred choice, but tracker and variable rates may suit some people better as these can often come with flexible features like no early repayment charges so people can make a partial repayment as and when they need,’ said Sykes.

But tracker and variable rates also come with added uncertainty over future interest rate changes.

There are some fixed-rate products out there with no exit fees, but borrowers will need to lock in for a long time. 

Habito’s new 10 to 40 year fixed rate mortgages, for example, enable borrowers to fix the interest for the lifetime of the mortgage with no exit fees, albeit at a higher rate of interest than the market average.

What else should borrowers consider?

On top of early repayment charges, borrowers should also consider the upfront fees that typically come alongside a mortgage deal.

There is often an arrangement fee which can either be paid upfront or added to the mortgage amount.

This may mean the cheapest overall mortgage deal is not necessarily the one with the lowest interest rate.

For example, borrowers looking to remortgage might be drawn in by TSB’s new two-year fixed deal currently offering a headline-grabbing 0.99 per cent interest rate.

But the mortgage, which is available to borrowers with at least 40 per cent equity built up within their homes, also comes with a hefty £1,495 product fee.

For a borrower with a mortgage of £120,000 on a 30-year term, it would cost £10,735 over the initial two-year fixed period with TSB.

Nationwide currently offer a two-year fixed deal with a 1.54 per cent interest, but with no fee and the offer of £500 cashback.

Although, the monthly payments would be higher, the total cost of a £120,000 mortgage over the two-year period would amount to £9,484 once the cashback had been included.

However, whether or not it is beneficial selecting a higher interest rate with a lower product fee will largely depend on how large the mortgage is.

‘Often the lower the interest rate, the higher the product fee so for someone borrowing £100,000, paying a high product fee for a better interest rate may be an expensive thing to do,’ says Sykes.

‘Whereas for someone borrowing £500,000, the higher fee may be worth it in order to secure the lower interest rate.’

Borrowers not only need to be wary of paying the higher fees, but also the frequency at which they will be required to pay them if they continue to choose shorter mortgage deals in a bid for the cheapest interest rate.

‘Lower-rate products are typically the shortest fixes on the market, but, keep in mind that you’ll pay these fees every time you remortgage,’ says Will Rhind, head of mortgage advice at Habito.

‘Most mortgages have fees of around £999, so if you chose a two-year fix every time, you’re also going to pay that fee potentially 14 times over a 30-year mortgage term, costing you around £14,000 in fees alone.

‘Comparing that fee cost to taking a 5-year, or a 10-year mortgage each time, then the rate might be higher, but you’ll pay fees just six or three times over the lifetime of the loan, not 14 times.’

On top of product fees, lenders sometimes offer financial incentives such as covering the cost of a borrower’s legal fees or the mortgage valuation.

‘Lower-rate products don’t tend to come with many freebies, whereas those with higher monthly interest rates can come with free house valuations, no legal fees, the promise of cashback, and more,’ says Rhind.

‘Sometimes it can be worth it, but other times not – so you need to watch out for both low and high-rate mortgages and compare their true cost with everything – freebies and fees – included.’

You can do this using This is Money’s mortgage calculator. 

Another key consideration when applying for a mortgage is whether you might want the option to overpay your mortgage each year.

Overpayments are extra payments made on top of the usual monthly mortgage commitments, which will enable borrowers to pay off their mortgage faster and save on overall interest.

The majority of fixed-rate mortgage deals allow borrowers to make overpayments amounting to 10 per cent of the total outstanding amount each year without incurring early repayment charges.

Some are more flexible, but others may be more restrictive, so borrowers should always check before making overpayments.

‘The best way to save money on your mortgage is to pay it down as quickly as possible,’ says Rhind.

‘If you’re in a job where you’re paid bonuses or you’re likely to have a financial windfall or come into any inheritance, it’s important to know how much you’re allowed to overpay on your mortgage before you get charged a fee.’

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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Foley to bring school reopening plan to Cabinet on Tuesday

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Minister for Education Norma Foley says she has every confidence schools will reopen fully from late August and early September.

Ms Foley said there was ongoing engagement between her department and public health officials on the matter but all schools were set to reopen.

Strong mitigation measures would be in place in schools to ensure that they would continue to be controlled environments, she told RTÉ radio’s Today with Claire Byrne show on Monday.

Covid-19 infection rates among children were at their highest when children were not at school and public health experts had pointed out “on a consistent basis to schools being a very significantly controlled environment”.

The safe operation of the Leaving Certificate exams and enhanced summer camps indicated that the safe operation of education could be maintained, she said.

A plan would be put in place to allow schools to “draw down” CO2 monitors and the Minister said she was confident there would be enough monitors for all schools by the start of the new school year.

In relation to Covid-19 vaccines for children, Ms Foley said the “expertise” lay with the National Immunisation Advisory Committee (NIAC) from which her department would take guidance.

“I have received confirmation that the 16 to 18-year-old cohort should be in a position for online registration in the coming days, and I have been advised that the 15-year-olds cohort are still being considered by NIAC and there has been no definitive timeline given,” she added.

Ms Foley will bring a plan to Cabinet on Tuesday outlining enhanced public information campaigns, the outcome of antigen testing pilots, and the purchase of C02 monitors to assist in ventilating classrooms.

Capacity limits on school transport services will also remain in place.

Government sources were adamant on Sunday that second-level education would resume in the autumn, despite concerns among public-health officials that the wave could grow following the reopening of indoor dining today, before peaking in September.

“Schools will reopen,” a senior Coalition source said.

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Over 40 complaints made about ‘unsuitable’ books on English curriculum

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Some books being studied by Junior Cert and Leaving Cert English students feature “disturbing and sick content” and material that is “clearly unsuitable for minors”, complainants have told the Department of Education.

The department has received more than 40 complaints on the issue in recent months, with one email to Minister Norma Foley describing The Handmaid’s Tale by Margaret Atwood as “nothing but sadistic, upsetting and of no moral learning or value to students”.

The acclaimed dystopian novel is based in a patriarchal totalitarian state where women, or handmaids, are forced to produce children for commanders.

One “concerned parent” said they were “perturbed” that their teenager was studying the novel Room by Irish author Emma Donoghue.

‘Questionable’

They said many of the topics in the book were “questionable” and that greater consideration should have been given before the book was “forced upon sensitive people in this day and age”. The Booker-shortlisted story is told from the perspective of a young boy held captive in a small room with his mother.

The emails, released to The Irish Times under the Freedom of Information Act, were from parents, one of whom said they were “appealing to and begging” the department to change the curriculum.

One parent expressed “shock and concern” about the prescribed reading lists, citing a perceived “lack of vigilance regarding the age appropriateness” of some books. “The material is offensive, abhorrent and clearly unsuitable for minors,” they said.

The curriculum could “only be described as the sexualisation and desensitising of our children… there needs to be an investigation into this whole sordid affair”, another complaint said.

‘Enslaving’

One person said the book list was “enslaving” students to “abominable ungodly content”, while another sarcastically suggested there was “nothing to stop” Fifty Shades of Grey, the bestselling explicit erotic romance novel, being added.

Some emails were directed towards Ms Foley personally, and called for her to be fired and “held directly responsible”. The department’s response stated that the curriculum at all levels was considered to be for all learners “regardless of race, religion, socioeconomic background, gender or orientation”.

It said it was important that each book was viewed “in its entirety rather than being reduced to particular sections which may be especially controversial”, and that the texts had “strong literary pedigrees” and featured on curricula internationally.

There were also several emails sent to the department in defence of the curriculum, predominantly from students.

The text-list working groups for each subject, convened by the National Council for Curriculum and Assessment, are comprised of teachers, third-level lecturers, staff from relevant support agencies and experts in children’s and young adult literature. The curriculum did not change this year though the Minister said it would be reviewed in the coming months.


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EDEN CONFIDENTIAL: A new £10m home sweet home in the Cotswolds for Nick Candy and Holly Valance 

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You might have thought having a Chelsea pad worth more than £75 million would be enough for most property tycoons, but not for Nick Candy.

I can disclose that Candy and his pop star wife, Holly Valance, have splashed out well over £10 million on a Grade II‑listed mansion in Oxfordshire.

They will be a short drive from trendy private members’ club Soho Farmhouse, where Prince Harry courted Meghan.

That's sweet: Nick Candy and his pop star wife, Holly Valance, have splashed out well over £10 million on a Grade II‑listed mansion in Oxfordshire (pictured)

That’s sweet: Nick Candy and his pop star wife, Holly Valance, have splashed out well over £10 million on a Grade II‑listed mansion in Oxfordshire (pictured)

Holly Valance and Nick Candy attend Lisa Tchenguiz's 50th birthday party at the Troxy in 2015

Holly Valance and Nick Candy attend Lisa Tchenguiz’s 50th birthday party at the Troxy in 2015

The seven-bedroom property has a pool, stables, tennis and squash courts and its own chapel

The seven-bedroom property has a pool, stables, tennis and squash courts and its own chapel

While it is unknown how much the couple paid, records show it was bought for £8m in 2012

While it is unknown how much the couple paid, records show it was bought for £8m in 2012

The house is a short drive from trendy private members' club Soho Farmhouse

The house is a short drive from trendy private members’ club Soho Farmhouse

Candy and his pop star wife, Holly Valance, have splashed out well over £10 million on the property

Candy and his pop star wife, Holly Valance, have splashed out well over £10 million on the property

The seven-bedroom property has a pool, stables, tennis and squash courts

The seven-bedroom property has a pool, stables, tennis and squash courts

Candy, 48, declines to say how much they paid, but the house was bought by the previous owners for £8 million in 2012

Candy, 48, declines to say how much they paid, but the house was bought by the previous owners for £8 million in 2012

Prices have rocketed in the area, where locals include Kate Moss and JCB tycoon Lord Bamford and his wife Carole

Prices have rocketed in the area, where locals include Kate Moss and JCB tycoon Lord Bamford and his wife Carole

Candy, who has two daughters with his wife, adds: 'We're very immersed in our quiet country life at weekends'

Candy, who has two daughters with his wife, adds: ‘We’re very immersed in our quiet country life at weekends’

‘We have been looking for years to get something in the Cotswolds for the family, and finally, a year ago, we found a gorgeous family home in a wonderful village,’ Candy tells me.

The seven-bedroom property has a pool, stables, tennis and squash courts and its own chapel.

Candy, 48, declines to say how much they paid, but the house was bought by the previous owners for £8 million in 2012.

Since then, prices have rocketed in the area, where locals include Kate Moss and JCB tycoon Lord Bamford and his wife Carole, who started the Daylesford organic empire.

Candy, who has two daughters with his wife, adds: ‘We’re very immersed in our quiet country life at weekends and adore the friendly and welcoming village.’

Candy's luxury two-storey penthouse in Hyde Park has gone on sale for £175million

Candy’s luxury two-storey penthouse in Hyde Park has gone on sale for £175million

The stunning apartment is split over two levels, boasts five bedrooms, a 21m swimming pool, and measures around 18,000 sq ft - the equivalent of almost 18 average homes in England.

The stunning apartment is split over two levels, boasts five bedrooms, a 21m swimming pool, and measures around 18,000 sq ft – the equivalent of almost 18 average homes in England. 

Prolific author Alexander McCall Smith, creator of The No. 1 Ladies’ Detective Agency has been promised great things – but only after his death.

He says: ‘I was on tour in the United States and this woman came up to me with a book for signature, and she looked at me and said: ‘You know something, you’re going to be much more successful posthumously.’ ‘

The writer, 72, who has written 21 novels in the series, says. ‘She wasn’t being rude, but it was rather an odd thing to say to somebody.’

How guitar guru Beck gave Depp a silver lining 

Pictured: Johnny Depp is planning his comeback

Pictured: Johnny Depp is planning his comeback

With his acrimonious divorce from actress Amber Heard, and their bitter court room showdown in London last summer, Hollywood star Johnny Depp suffered the biggest setback of his glittering career.

Now, however, I hear he’s quietly planning his comeback — right here in Britain.

The 58-year-old star of Fantastic Beasts and Charlie And The Chocolate Factory has been taken under the wing of British rock legend Jeff Beck.

The Hi Ho Silver Lining guitarist, 77, who’s so talented he had each of his fingers insured for £700,000 in 2010, has secretly been hosting Depp at his Riverhall country estate in Wadhurst, East Sussex, where they’ve been writing and recording together in Beck’s studio. Depp is an accomplished guitarist himself.

‘They’ve been collaborating on material for Jeff’s next album,’ reveals a source close to Depp. ‘It’s been great for Johnny to get back to his first true love, which is music.

‘Jeff has been a great friend to Johnny during a very difficult time, and being away from Hollywood has been exactly what Johnny needed.

‘He wants to take a step back from everything and focus on a comeback through music.’

Eight-time Grammy Award winner Jeff, who has been called ‘one of the most influential lead guitarists in rock’ by Rolling Stone magazine, recorded a cover of John Lennon’s Isolation with Depp last year, intended to help people cope with life in lockdown.

Johnny Depp of Hollywood Vampires performs on stage at Celebrity Theatre in 2018 in Arizona

Johnny Depp of Hollywood Vampires performs on stage at Celebrity Theatre in 2018 in Arizona

In 2019 they played together at the Crossroads Music Festival in Dallas, Texas, for Eric Clapton’s charity, then did a short tour of the U.S.

Depp has previously featured on songs by Oasis, Iggy Pop, and Aerosmith, as well as on records by his ex-girlfriend, singer Vanessa Paradis, with whom he has two children. In 2015, he formed the super group, Hollywood Vampires, with Alice Cooper and Joe Perry.

‘Johnny hopes to return to films eventually,’ adds the source, ‘but it’s music first.’

Boogie-woogie pianist Jools Holland is learning to sing lullabies. The Later . . . with Jools Holland host has become a grandfather at the age of 63.

‘I am very pleased that I now have a wonderful grandson, Gabriel,’ he says. His musician daughter, Mabel Ray, 30, is the proud mum.

‘We seem to have identical hair,’ he adds of the baby. ‘He is a delightful little fellow. All thanks to the fantastic staff at Homerton University Hospital for delivering him to us.’

Queen’s Windsor gong show for late Duke’s loyal page

The Queen is making sure Prince Philip’s most steadfast former aides feel rewarded.

I hear that she invited the Duke of Edinburgh’s loyal page, William Henderson, to Windsor Castle this week to collect his gong.

His appointment as a Lieutenant of the Royal Victorian Order was announced on what would have been Philip’s 100th birthday.

Henderson was among those who took part in the funeral procession, walking behind the coffin.

Known for his sarcastic quips when required to report on the love lives of the Royal Family, waggish news anchor Simon McCoy seems to be secretly obsessed with the Windsors.

‘If I were invisible, I would go into Highgrove and stand by the phone to listen to any conversation Prince Charles might have with Harry,’ admits McCoy, who recently moved from the BBC to its new rival channel, GB News.

‘I feel desperately sorry for Charles — I really do. Family difficulties are bad enough without one of you bleating about it to the Press all the time.’

Creating a buzz with Angelina the Queen Bee 

There’s a buzz about Angelina Jolie, but it’s nothing to do with her film career.

The actress brought a touch of Hollywood glamour to the new French Apidology Observatory, in Sainte-Baume, where she presented its first graduates with their diplomas.

Angelina Jolie with children Pax, Zahara and Shiloh seen shopping at trendy KITH's in Paris, France

Angelina Jolie with children Pax, Zahara and Shiloh seen shopping at trendy KITH's in Paris, France

Angelina Jolie (pictured shopping Paris) brought a touch of Hollywood glamour to the new French Apidology Observatory where she presented its first graduates with their diplomas

Jolie, 46, who’s recently been seen out with her British ex-husband Jonny Lee Miller, was there because she’s involved in the Women for Bees project, which aims to encourage women to become beekeepers.

Clearly, there’s only one Queen Bee.

Paymaster General Penny Mordaunt, who starred on TV diving show Splash, will be demonstrating her water skills at the local pool rather than heading off to the Med this summer.

‘I’ll be staying in my constituency and spending time at my local lido,’ the MP for Portsmouth North tells me at the Westminster launch party for her book, Greater: Britain After The Storm, which she’s co-written with Chris Lewis. ‘I’ve earned that — I went to great lengths to save it.’

The forecast is hotting up with Carol’s exotic secret 

This could liven up those dull BBC meteorological reports: weather presenter Carol Kirkwood has revealed a secret skill.

‘I can belly-dance,’ whispers the former Strictly contestant.

‘It is actually quite hard, but I learned to do it when I was a student travelling in Turkey and Greece.’

The Scottish hotelier’s daughter, 59, adds: I can’t claim to be very good at it — but I do at least have the belly for it these days.’

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