Comparing a 3.49% one-year fix on a £386,100 London purchase

[jade_details]

I have now added the fee to my calculations, and the 3.49% quote no longer looks as clearly ahead. It is a one-year fixed deal for a London purchase at roughly £386,100, with the available rate also depending on the loan-to-value band.

Should I compare lenders over the fixed twelve months by adding the fee to the interest paid and noting the remaining balance, while testing the monthly payment separately? I am also checking whether the fee is financed, along with portability and early-repayment conditions. I do not want the calculation to work only on the assumption that a new mortgage will be available immediately when the fix ends.

 

[gia.dawn]

For a one-year fix, I would compare the cost over that year rather than rank offers by headline rate alone. Include interest and arrangement fees, then note the mortgage balance remaining after month 12. Keep the monthly payment as a separate affordability test. APR is still informative, but it may not match your likely timeline if you expect to refinance.

 

[otis.elm]

What LTV tier are you actually in, and would the arrangement fee be paid upfront or added to the loan? Those two details can reverse the result. Also compare quotes using the same loan amount and mortgage term; otherwise the monthly-payment figures are not measuring the same thing.

 

[UmaLowe]

What changed my view was the fixed period ending after only twelve months. The first-year comparison is useful, but it cannot carry the whole decision when refinancing so soon depends on the property valuation, available products and the borrower still meeting affordability checks.

Paying a slightly higher known cost now may be reversible through a later refinance; being unable to switch on schedule is not under the borrower’s control. I would therefore add a scenario in which the loan remains on the lender’s follow-on rate for several months. That example will show whether the apparent saving survives a delayed refinance rather than assuming a seamless change at month twelve.

 

[hearth.calm]

Portability needs its own reading of the terms. Even where a mortgage is described as portable, a future move can still involve another affordability assessment and conditions relating to the new property. It is not necessarily a promise that the existing rate simply follows you. Ask the lender or broker how the early-repayment charge interacts with a move during that fixed year.

 

[yuki_keel]

A simple comparison sheet would help: loan amount, LTV tier, fixed rate, fee, whether the fee is financed, monthly payment, interest paid in year one, balance after year one, early-repayment charge and what happens after the fix. Then add a second scenario where refinancing is delayed. That should expose whether 3.49% is genuinely cheaper or just looks cheaper.

 

[jade_details]

Thanks, this has identified the flaw in my first comparison: I was putting headline rates side by side even though the fees and LTV treatment were not equivalent. I’m going to rerun everything with the same loan amount and term, keep the fee visible rather than burying it in the payment, and add a delayed-refinance scenario. I’ll also get the portability wording clarified rather than relying on the label.

 

[gia.dawn]

That approach sounds better, but if you consider adding a fee to the mortgage, remember it then affects both the balance and the interest calculation. I’d show two totals: non-recoverable borrowing cost over the year, and actual cash leaving your account. They answer different questions, especially when upfront affordability is tight.

 

[readTheEcho]

Don’t let the spreadsheet hide the monthly risk. Test whether the payment remains manageable after the one-year rate ends, not only whether the introductory payment fits. The cheapest first year may be the wrong choice if it leaves no room for a higher payment, another arrangement fee or the ordinary costs of owning the London property.

 

[ember.full]

I’d use all three figures, but for different purposes: first-year interest plus fees to compare the fixed deals, monthly payment to test affordability, and APR as a warning that the longer-term cost may differ from the introductory offer. The deciding document should also show the post-fix position and early-repayment conditions. If two offers are close, fewer refinancing assumptions may be worth more than a small apparent saving.