Are You Eligible For The Best Mortgage Deals?

Have you got what it takes to get the top mortgage deals this summer?

It feels like not a day goes by without a mortgage lender launching a new range -- and that's because it doesn't.

The last month has been littered with new launches and rate cuts and today sees another. Abbey has introduced a new range of low-fee mortgages, just a week after cutting its existing range of fixed rate mortgages by up to 0.25%.

Good news for borrowers? Only for those that are particularly low risk, as the new Abbey deals are only available up to 60% loan to value (LTV). That means that borrowers will have to put up a 40% deposit (or equity) in order to get a deal.

On an average UK property of £164,000,* that means having to stump up over £65,000 to get the deals.

LTV chasm

Targeting low-risk borrowers is a theme of this year's mortgage market as cautious lenders begin to dip a toe back into the world of aggressive mortgage pricing. But it's only this low-LTV sector where they are currently willing to do it.

And since first-time buyers and home movers usually need to borrow at least 78% of their property's value, according to the Council of Mortgage Lenders, it is clear that Abbey's deal is aimed firmly at a remortgaging audience.

But if you're in that position, with a healthy 40% equity, the deals are fairly competitive.

The new rates are:

• A two-year tracker at 5.94%
• A two-year fixed at 5.79%
• A three-year fixed at 5.84%

And they all come with a tiny £499 fee. Yes, 18 months ago this may have been a completely standard fee but in 2008, when a completion fee under a grand is seen as modest, it's small.

However, there is another catch. If the restrictive loan-to-value doesn't get you, the maximum loan size might. The loans are only available up to £250,000 so jumbo mortgage borrowers will not be able to take advantage of the low fees and rates.

But how do Abbey's new deals stack up against the competition?

Fixed rates

Abbey's two-year fix at 5.79% and three-year fix at 5.84% are decent rates -- indeed anything under 6% is pretty competitive.

But Market Harborough Building Society has a similar deal -- slightly cheaper on rate (5.75%), but slightly higher on fee (£595), and it's available up to 75% LTV, so accessible to many more borrowers.

However Abbey has another trick up its sleeve. It has not just launched the three low-fee deals, but has also reduced some of its other fixed rates, including its two and three-year deals up to a more generous 70% LTV. And the rate on these deals comes in lower than Market Harborough's, at 5.69%.

However, you do need the extra 5% deposit to secure this mortgage, plus the fee is £400 higher at £995.

As ever, the best deal for you will be dependent on your exact circumstances --including the size of your deposit and whether you want to pay a larger fee for a lower rate.

But none of the fixed rates above address a massive swathe of mortgage borrowers -- those of us with more modest deposits.

Smaller Deposits

First Direct, for example, will lend up to 80% on its three-year fixed rate of 5.99% with a fee of £598. And if you only have a 10% deposit, Skipton's three-year fixed rate is not a million miles away from the Abbey deal at 5.99%, but does come with double the fee at £1,090.

If you want to pay a smaller fee but only have a 10% deposit, you will have to sacrifice the low rate - for example, you could opt for HSBC's 6.43% three-year fix with a fee of £599.

Base Rate Trackers

Abbey's tracker is, again, a decent deal but it is in an extremely competitive sector of the market and in my view there are better deals at the same or less restrictive LTVs.

For example, at the same loan to value (60%), Woolwich offers a significantly lower rate of 5.69%, albeit with a higher arrangement fee of £995. And the tracker is a term product unlike Abbey's three-year deal, so a longer-term, transparent deal, which is also easy to switch from if you want to change mortgage.

At a similar fee to the Abbey deal, Nationwide has a lower rate of 5.74% on its three-year tracker and it's available up to 75% loan to value. The fee is only £100 more expensive at £599.

And if you need to borrow up to 90% HSBC's lifetime tracker is still cheaper than the Abbey deal at 5.79% and comes with a modest £599 fee.

So while the Abbey deals are definitely a welcome addition to the market and will certainly be the most suitable for some borrowers, the majority will be better off shopping around to find other deals to suit their needs.

* according to Nationwide's latest index 

More: Fixed Rates Falling Further