Avoid these expensive mortgages

Some borrowers pay a very high price to fix their mortgage rate. Is it worth it?

Clearly some homeowners or homebuyers are desperate or ill informed.

I've been casting my eye over the mortgage market to identify some of the pricier mortgage deals on the market today, and found some positively eye-watering rates on offer from some of the nation's most familiar lenders.

Take a look at what some of the most expensive mortgages cost:

*Average cost during each year of the deal, including all mortgage fees and charges. I have assumed the arrangement fee is added to the mortgage.

Data from the providers' websites. 99s are rounded.

The above are based on a £160,000 property with a loan-to-value of 85% (which means a deposit or equity of 15%). They may not be the absolute most expensive mortgages around, but they are certainly the most expensive that I could find.

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The cheapest of these pricey mortgages is almost 6% above the Bank of England's base rate, an extraordinary margin. I hope that not too many borrowers feel they have to buy these mortgages.

Now, we're not talking here about mortgages for people with bad debts and 17 credit cards. These are available to those with no other debts and no bad marks on their credit record.

I don't know who buys those mortgages, but perhaps it's people who don't think 6% to 7% sounds all that high. If you agree with them and think those don't seem like expensive interest rates, take a look at the following table:

Cheap mortgages

The best tracker and discount mortgages, in the top half of this table, are far cheaper than in our most expensive mortgages table. We are talking hundreds of pounds per month, or thousands per year. You can get lifetime trackers, represented in this table by the best lifetime tracker from HSBC, that have no penalty for leaving and charge no fees, giving you the flexibility to fix when you feel the time is ripe. Yet it is more than £3,000 cheaper per year than the most expensive deals I found.

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You can also see from the bottom half of my table that you can fix up to a full five years at a far lower cost than with the most expensive mortgages, which were fixed for just two years at a far higher price. That's a higher price for far less safety.

The biggest difference in price is between Norwich & Peterborough's two-year discount variable deal and BM's Mainstream 2-year fix. By overpaying the difference of £4,100 a year for just two years, you can expect to save at least £3,000 in interest payments over the course of the mortgage. If you reduce the mortgage length to reflect the extra payments you've made, you could save a lot more.

Each of the lenders I mentioned in the first table also have far better products, but if a lender wants to saddle you with a product like those, look elsewhere.

It may also be worth speaking to a mortgage broker, who can give you a good idea of the best mortgages you currently qualify for, including some that may not be accessible to you direct. Why not pick the brains of our fee-free mortgage team over at our mortgage centre. The team is available to chat via instant messenger, email or over the phone.

Best buy mortgages

More: Compare mortgages through lovemoney.com | Ten steps to finding a mortgage | Save money with a tracker mortgage