Navigating the mortgage minefield

Fees are increasingly muddying the already confusing world of mortgages for consumers. While a poster in a bank window showing a rate of 3.5 per cent looks spectacular, you can potentially be better off plumping for a mortgage of up to 4.5 per cent - depending on the fees involved and the size of your mortgage.

Louise Cuming, head of mortgages at moneysupermarket.com, said: "When comparing, there are three key things you need to find out - the rate, the fee and the amount that will be left owing on the mortgage.

"For example, on a two-year mortgage, you need to know how much you will have paid by the end of the two years (including paying the fee) and how much will remain outstanding on the mortgage.

"People will often forget to take into account how much remains on the mortgage - and will simply look at the monthly repayments and the fee when comparing - or worse still, only look at the monthly cost.

"What it all means is that, on a typical £100,000 capital and interest mortgage over two years, a rate of 4.5 per cent with no fee, will work out similar to a 4.0 per cent mortgage with a £1,000 fee, or a 3.5 per cent rate with a £2,000 fee.

"It is a mortgage minefield at the moment, with rates and fees differing wildly and, of course, the amount people owe varying greatly too.

"Borrowers must dig a lot deeper than the headline grabbing rate when comparing mortgages. On the face of it, a low interest rate might seem like a gift from the gods, but it won't necessarily mean you are saving money."