As a first-time buyer on the hunt for a cheap mortgage, it's natural to pay attention to choosing the lowest initial rate – but a fee-free deal might help you save a lot more in the long run.
Which? analysis of Moneyfacts data shows 40% of first-time buyer mortgages now come without any arrangement fees, up by 25% in the same period this past year.
However, while the quantity of first-time buyer mortgages available with no fee is rising, 61% still come with a fee to element in, which can make it difficult to figure out which is the greatest deal.
| Number of deals available to first-time buyers | Number of deals that include a fee | Number of deals which are fee-free | |
| March 2022 | 3,099 | 1,987 | 1,112 |
| March 2022 | 3,616 | 2,222 | 1,394 |
Here we let you know that to find the best mortgage deal, and reveal the least expensive fee-free mortgages for first-time buyers.
Can you spot the best mortgage deal?
Currently, Halifax offers the lowest-rate two-year fixed-rate mortgage for first-time buyers with a 5% deposit.
The 95% loan-to-value (LTV) mortgage deal posseses an initial interest rate of two.67% but has an eye-watering lb1,495 fee. This (APRC) for this deal is 4.2% (more about APRCs later).
Alternatively, Barclays is offering a two-year fixed-rate 95% mortgage having a higher initial rate of two.88% but no fees (APRC 4.1%).
So, which is the better deal: 2.67% or 2.88%?
At first glance, it looks pretty monochrome. The lower-rate Halifax deal provides you with small repayments. However, as you’ll see within the next section, the size of the charge means that it is more costly as a whole than the Barclays deal.
Rates can distort the real price of a mortgage
Here's how the two-year fixed-rate 95% LTV mortgage from Halifax, that has the cheapest interest rate available on the market with this kind of product, comes even close to the cheapest fee-free alternative from Barclays. We’ve based our calculations on the lb250,000 mortgage having a 25-year term, with fees paid up front.
| Halifax (initial rate 2.67%) | Barclays (initial rate 2.88%) | Difference | |
| Monthly repayments | lb1,143.07 | lb1,169.98 | Halifax deal is lb26.91 cheaper |
| Total cost over two-year deal period | lb28,928.68 (including lb1,495 fee) | lb28,079.52 | Barclays deal is lb849.16 cheaper |
As you can observe, the least expensive deal in the two-year period is Barclays’ fee-free mortgage which, despite having slightly higher monthly repayments, winds up being more than lb800 cheaper than the market-leading rate from Halifax in the course of the very first two years.
Generally, mortgages that provide a low rate but high fees are more likely to make sense for those borrowing a large amount, because the fee then represents a smaller proportion of overall borrowing.
With these two deals, the Halifax option only becomes less expensive than Barclays whenever a person borrows lb579,000 – greater than most first-time buyers could get and past the maximum borrowing limit of the product.
You can use our mortgage repayment calculator to check the expense of 1 mortgage versus another.
Best fee-free first-time buyer mortgages
We've analysed Moneyfacts data to get the best fee-free mortgages available to first-time buyers with small deposits.
Here are the best two-year fixed-rate 95% LTV mortgage deals that include no fees.
| Lender | Initial rate | Revert rate (SVR) | APRC | Lending area |
| Progressive Building Society | 2.79% | 5% | 4.74% | Northern Ireland |
| Barclays Mortgages | 2.88% | 4.24% | 4.1% | All UK |
| Skipton Building Society | 2.89% | 4.99% | 4.7% | England, Scotland, Wales |
If you are planning to treatment for longer here are the very best fee-free five-year fixed-rate 95% LTV mortgage deals.
| Lender | Initial rate | Revert rate (SVR) | APRC | Lending area |
| Monmouthshire Building Society | 3.19% | 5.24% | 4.6% | England, Wales |
| Digital Mortgages by Atom Bank | 3.24% | 4% | 3.76% | All UK |
| Post Office for Intermediaries | 3.28% | 4.74% | 4.2% | England, Scotland, Wales |
Finding the very best mortgage deal
When looking around for a mortgage it's important to look past the headline rate of interest and consider all the fees you’d need to pay.
You’ll should also consider the value of any extra benefits, such as cashback or free valuations.
If you can, it's easier to pay any fees up front instead of adding these to your mortgage in order to avoid paying interest on them throughout your term.
What’s the APRC, and does it matter?
Most mortgages provide an introductory interest rate which can last for a collection period, often two or five years.
Deals may also be advertised with an APRC, which means apr of charge, and is a way of conveying the overall cost of the mortgage.
How important this really is largely depends on how likely you are to change deals (known as remortgaging) at the end of the introductory period.
This is because the APRC is the average rate you'd pay within the entire term of the mortgage, based on both introductory rate of interest and also the ‘revert’ rate – the lender’s (usually higher) standard variable rate, which you’ll usually be moved onto after the introductory period should you don’t remortgage.
While an APRC can be handy because it also takes fees into consideration, if you plan to remortgage after the introductory period (that is more often than not the best thing to do), it becomes less relevant.
Comparing mortgages can be a small minefield so it’s well worth taking advice from an independent large financial company before you apply for any deal.
