The Post Office has reacted to competition from local lenders by launching an impressive new fixed-rate mortgage at 90% LTV.
The lender has replaced its previous 2-year fix for first-time buyers (3.99%) with a new mortgage at just 3.58%.
A cheaper deal at this loan-to-value ratio is currently available through the Monmouthshire Building Society (3.49%, with no fee), but the Post Office’s deal is more widely available and has fewer restrictions.
Customers face a hefty £1,495 fee to secure the mortgage, which makes the deal less competitive for smaller value loans but very competitive still for higher value loans.
Competition at 90% LTV
Despite the recent announcement that the Funding for Lending Scheme will no longer support residential mortgage lending from January 2014, lenders are continuing to push through impressive offers for first-time buyers.
The decision by Nottingham Building Society last week to reduce a number of its discounted rate mortgages for those with 10% deposits gave the lender a strong position in the sector.
But the Post Office’s new deal, which undercuts HSBC marginally in rate and fee (3.59% / £1,499), grows increasingly competitive as the size of the loan grows higher.
| 90% LTV Mortgage |
Mortgage |
Rate |
Fee |
Cost per Year of £150K Mortgage |
Cost per Year of £250K Mortgage |
| Nottingham Building Society | 3-Year Discounted Variable |
3.99 |
£299 | £9,591 (2) |
£15,918 (3) |
| HSBC |
2-Year High Street Special |
3.59 |
£1,499 |
£9,845 (5) |
£15,913 (2) |
| Post Office |
2-Year Fixed |
3.58 |
£1,495 |
£9,836 (4) |
£15,895 (1) |
| Nationwide Building Society |
2-Year First-Time Buyer Fix |
3.99 |
£400 |
£9,691 (3) |
£16,019 (4) |
| Monmouthshire Building Society |
3-Year Discount Variable |
3.49 |
£0 |
£9,002 (1) |
N/A |
As the table here shows: for a £150,000 mortgage at 90% loan-to-value, the Post Office is surpassed by three cheaper deals (measured by the cost per year during the initial offer period).
For a £250,000 loan, however, the Post Office becomes cheaper than rivals, because the savings to be made from a lower interest rate offsets the higher fee as the value of the loan goes up.
For buyers wishing to fix for longer as the threat of rising interest rates grows, the Post Office has also improved its 3-year fix at 90% to just 3.94%, which is also one of the best rates in the sector.
For more about how fees affect the cost of a mortgage deal, check out our guide. You can also view a full list of Post Office mortgages here.
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