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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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House and 54 acres for sale near Amanda Owen’s Our Yorkshire Farm

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Fancy living near the Yorkshire Shepherdess? Nearby derelict cottage with 54 acres of land in North Yorkshire is up for grabs for £255k

  • Property is near Ravenseat, from Amanda Owen’s TV Show Our Yorkshire Farm
  • Carter’s Cottage is the name of the property listing and it includes 54 acres
  • The renovation project in North Yorkshire is on the market for £255k










Fancy living near the Yorkshire Shepherdess and having the Yorkshire Dales in your back garden?

Now is your opportunity, as a property with 54.5 acres of land is available to buy for £255,000 near Ravenseat Farm, home to shepherdess Amanda Owen, her husband of 21 years Clive, and their nine children.

The catch is that the house and adjoining barn are derelict and off-grid, with no mains services but with access to natural water on the site. 

The family and remote Ravenseat farm feature in the popular Channel 5 show Our Yorkshire Farm, as well as the best-selling book The Yorkshire Shepherdess

Amanda Owen is pictured with her family, consisting of her husband Clive, and their children Raven, Reuben, Miles, Edith, Violet, Sidney, Annas, Clementine, and Nancy

Amanda Owen is pictured with her family, consisting of her husband Clive, and their children Raven, Reuben, Miles, Edith, Violet, Sidney, Annas, Clementine, and Nancy

The nearby property for sale for £255k is called Carter's Cottage and has a similar feel to Ravenseat due to the beautiful North Yorkshire countryside

The nearby property for sale for £255k is called Carter’s Cottage and has a similar feel to Ravenseat due to the beautiful North Yorkshire countryside

There are no mains services to the former cottage or the land but there is a natural water supply at various points

There are no mains services to the former cottage or the land but there is a natural water supply at various points

The property for sale is called Carter’s Cottage and has a similar feel to Ravenseat as it is surrounded by plenty of beautiful North Yorkshire countryside.

However, it does not currently include a habitable home. Instead, there is a derelict stone cottage that would need to be converted before it can be occupied – or even rented out as a holiday home – as well as an adjoining stone barn. 

The property for sale is in Arkengarthdale, which is a dale on the east side of the Pennines in North Yorkshire.

There are no mains services to the former cottage or land, but there is a natural water supply at various points. The property is on the market for £255,000 via estate agents H&H Land & Estates.

Amanda runs Ravenseat farm with her husband Clive. She says hundreds of curious fans come to visit in hopes of catching a glimpse of her or her children

Amanda runs Ravenseat farm with her husband Clive. She says hundreds of curious fans come to visit in hopes of catching a glimpse of her or her children

There is a derelict stone cottage that would need to be converted before it can be occupied - or even rented out as a holiday home

There is a derelict stone cottage that would need to be converted before it can be occupied – or even rented out as a holiday home

The property for sale is in Arkengarthdale, which is a dale on the east side of the Pennines in North Yorkshire

The property for sale is in Arkengarthdale, which is a dale on the east side of the Pennines in North Yorkshire

While bookings are not currently being taken due to the pandemic, fans of the show have previously been able to visit and stay at Ravenseat Farm by renting out either a shepherd’s hut for £90 a night or a separate property on the family’s land for £175 a night.

It is possible to make the area nearby your regular holiday spot – or even your permanent base – as the property for sale is around 14 miles from Ravenseat Farm.  

The building needs a lot of work has plenty of scope to become a family house or holiday home, depending on budgets and planning permission

The building needs a lot of work has plenty of scope to become a family house or holiday home, depending on budgets and planning permission

Land has become increasingly sought-after amid the pandemic’s so-called ‘race for space’ among buyers.

Daniel Copley, of property website Zoopla, said: ‘If you’re tempted to make the move from the city to the beautiful Yorkshire countryside, this cottage and 54.5 acres of pasture land is brimming with potential and has a truly stunning location overlooking the Yorkshire Dales.’

The property for sale is on an elevated position on the east side of Arkengarthdale. 

Reeth is around four miles to the east, with the larger market town of Richmond about 14 miles to the east.

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‘After divorce, I’ve fallen in love. But something is holding me back’

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Question: I’m a divorced man, and I think I’ve fallen in love. This woman I care about so much brought me back to life after my divorce woes and I feel happy when we’re together. My life would certainly change if the relationship progressed and I feel the need to hit the brakes. Is it fear holding me back? Some advice would be great.

Answer: I think it is great that you are able to identify fear as the block to your relationship and it is worth looking at this. You have had a divorce, so your experience of relationship breakup is real and is clearly causing you to pause before heading into a committed relationship again. Some areas worth checking are your capacity for self-awareness, your relationship patterns and habits and your history of decision making.

Looking at self-awareness first – are you conscious of what motivates your actions and speech? In terms of self-awareness, there are many aspects of our ourselves which we are aware of, but we do need help with uncovering the full picture. For example, we can often see that someone we live or work with is stressed but they themselves would not know or acknowledge this and think that they are operating from a calm and collected place. It might be worth you checking with friends what they see in your new relationship and how they see you behaving. Do you seem happier to them, or is there wariness or caution in your approach to your partner? Your friends or family will be able to evaluate your wellness (or not) without the emotion or fear that you may have operating.

Ask for some honest opinions and remember if you ask for advice, take it on board as they may have more objectivity than you do. We all have relationship patterns and habits, so it is worth looking at yours to see if this is influencing your current impasse. These patterns typically start with our family of origin. For example, if there were difficulties (silences, anger, distances, or lack trust and love) in your parents’ relationship it is likely that you have a capacity to put up with or repeat such patterns in your own relationships.

Send your query anonymously to Trish Murphy

It helps to talk it over with someone you trust, so that you can hear the emotion that is going on in your voice and then act to disperse it

It sounds as though you are mistrusting of someone who has “brought you back to life” and it is worth looking at whether this caution is coming from your own past experience or from fear of getting into a relationship pattern similar to your parents’ one. It takes courage to challenge our patterns and the nature of habit is that it operates outside of conscious thinking, so we can respond without even knowing where we are coming from, eg we push someone away just as intimacy is growing. Behaviour such as this could derive from a generational fear of rejection, or a fear of closeness, or of being discovered as not what we seem to be. It is good to explore such habits as we can struggle to see them operating and they can operate as a huge block in our lives.

It is true that the “in-love” feeling can sometimes mask some of the adored person’s characteristics and this is why we always need the “head” as well as the “heart” when making decisions. What is your decision-making like normally? Do you have enough knowledge of this person to make a decision about joining your lives together? Have you spent enough time with them and their circle of friends to make an informed choice? Sometimes the feeling of intense connection at the beginning of a relationship can make us lose sight of the fact that we don’t know the other person very well and in these situations we would do well to slow it down and let our judgement work when the time is right. If you are happy that you have enough knowledge and information to make this decision, then you are probably right that it is fear that is stopping you moving forward.

A little fear is natural and can even help us, for example we drive under the speed limit oftentimes out of fear of getting a speeding ticket. However too much fear can be debilitating, and it can completely bock our intelligence. All relationships involve risk, in that we have to trust that someone else will value us and not reject us. Fear is such a powerful emotion it can cover other more rational and sane judgements and so we need to ensure that we are not just operating from that place.

It helps to talk it over with someone you trust, so that you can hear the emotion that is going on in your voice and then act to disperse it. However, it is worth knowing that fear and panic are closely aligned so we need to tackle them slowly and incrementally or else we go into a kind of frozenness. Overcome small fears first – this might involve speaking with some honesty with your partner – and gradually build up to the bigger fears. Your confidence and self-awareness will grow along the way and this can only benefit you. 

Click here to send your question to Trish or email tellmeaboutit@irishtimes.com

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Lighthouse workers end up with front-row seats for Storm Barra

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Four lighthouse workers who went to Fastnet Lighthouse in west Cork to carry out maintenance on Friday ended up having front-row seats for Storm Barra as they had to stay onsite due to the conditions.

The lighthouse recorded a wind gust of 159km/h on Tuesday morning but Irish Lights electronic engineer Paul Barron said that it was a safe place to be as the country battened down the hatches to face the storm.

Mr Barron and his colleagues Ronnie O’Driscoll, Dave Purdy and Malcolm Gillies made the journey to Fastnet on Friday to do maintenance work and were due back on Tuesday but their helicopter flight was cancelled because of the storm. They hope to arrive back on the mainland on Thursday.

Mr Barron said they are passing their time onsite by watching Netflix and having a few steaks and rashers. He admitted it was a day to remember on the lighthouse which is 54 metres above the sea.

“There is a team of four of us out here. It has been quite a rough day. We started off this morning at around 2am and by 10am or 11am we were in the eye of the storm. I was in the merchant Navy before as a radio officer so I have seen a lot of bad weather. I am with Irish Lights 32 years but I haven’t normally seen it like this. We wouldn’t normally be out in this. You are talking 9m swells with winds gusting up to 90 knots.”

He captured some footage of the storm on his phone. During the worst of the weather the men found it hard to hear each other as it was so noisy during the squalls.

The tower was “shuddering a bit” but Mr Barron managed to shoot video footage which attracted attention online and even a call from Sky News.

He says the lighthouse has kitchen facilities and they always bring additional food in case of emergency.

“It could be a fine summer’s day and there could be thick fog and the chopper wouldn’t take off so we always bring extra food. We are passing the time by watching Netflix! This is a good place to be in the eye of a storm. This lighthouse has been built a hundred years so it has seen a lot of storms.”

As for families being concerned about the men Mr Barron jokes that their loved ones are probably relieved they aren’t at home hogging the remote control.

Meanwhile, in Cork city centre the river Lee spilled on to quays and roads on Tuesday morning but no major damage to property was caused. Debris and falling trees kept local authority crews busy and power outages were reported in a number of areas across the county.

At least 23 properties were flooded in Bantry in west Cork. The council had placed sandbags along the quay wall and the fire brigade had six manned pumps around the town.

In north Cork, a lorry driver had a lucky escape in Fermoy when his vehicle overturned on the motorway during the high winds. Traffic diversions were put in place following the incident.

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