Lose pounds with skinny end dates, literally

The end dates for your initial interest rate could be up to four months short of the best in the market, warns Charcol.co.uk

Different lenders offer rates for up to 16% longer for same arrangement fee* Charcol.co.uk has found that mortgages with a "Skinny End Date" can potentially cost a borrower with a £200,000 mortgage £968 by not being on the longest deal available**.

Katie Tucker, spokesperson for Charcol.co.uk, comments: "Borrowers tend to overlook the month part of the end date when selecting a mortgage product, often focusing on whether it is roughly a two, five of ten year fix.

This could prove to be a costly mistake for many borrowers." Looking specifically at some of the products on the market, the case for checking your end date becomes crystal clear.

Alliance and Leicester currently offers a two year fixed rate priced at 5.94% with a £1,999 arrangement fee and an end date of 30th June 2009.

The Bank of Scotland offers a two year fixed rate with the same rate but an end date of 31st October 2009.

For someone with a ?200,000 loan the difference between the fixed rate and an SVR of 7.85% is £242 a month, so in just four months the additional benefit adds up to £968.

Tucker continues: "The end date is particularly important if borrowers have paid a premium arrangement fee in exchange for a low rate, deals that are more prevalent in today's market.

If you are paying an arrangement fee of 2.5% for your two year fixed rate, it should be 1.25% for each year of the deal.

However an end date short by four months makes this 1.5% for a full year - the equivalent of 0.25% added to the annual interest rate.

Additionally, if you stay on the lenders reversion rate for a few months at the end of your deal you could lose several hundred pounds in interest.

"Realistically, borrowers would simply remortgage earlier but on a long term basis this means that during a twelve year period you will bear the arrangement, valuation and exit fees of seven remortgages, rather than six." There are times however when a skinny end date is appropriate for a borrower.

If you feel rates are expected to be lower in two years but you want a fixed rate for budgeting reasons then a short end date may suit.

The message is that you just need to be aware of what your terms are and make sure they suit your circumstances.

Borrowers should contact 0800 358 5560 or visit www.charcol.co.uk for the latest products and news on mortgages.

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