Comparing a 6.52% three-year fix on a £206,700 London purchase

[DirectCairn]

I want a payment that remains comfortable each month, but the lowest headline rate no longer looks like the obvious choice. The quote is for a one-bedroom London property at about £206,700, with 6.52% fixed for three years. Once the fee structure and borrowing band were applied, the apparent advantage narrowed.

I had assumed comparing everything over the three-year fix would settle it. That may fail if one offer is expensive to leave early or cannot move with me, especially if I sell or refinance sooner than expected. Should I first compare three-year interest and fees on identical loan assumptions, then treat portability and early repayment as separate scenarios?

 

[yuki_keel]

For a three-year decision, I would compare the cost over those same three years: interest, arrangement and valuation-related fees, plus any likely exit cost. Keep principal repayment separate because it reduces the balance rather than disappearing as a cost. Also compare the remaining balance at the end, using the same loan term and deposit assumptions for every quote.

 

[planTheWorkshop]

What is the loan-to-value band, and would the arrangement fee be paid upfront or added to the mortgage? Adding it may make the initial cash requirement easier but means borrowing more. Your likely plans after three years matter too: staying, refinancing or selling can each make a different offer look best.

 

[nico_compares]

I would not dismiss APR entirely. It gives a broader comparison than the headline rate, particularly where one deal loads costs into fees. The caveat is that it can rely on assumptions extending beyond the fixed period, so it may not match someone who expects to refinance as soon as the three years end. Use it as one column, not the final verdict.

 

[DirectCairn]

That distinction between cost and principal is helpful. I had been comparing total payments, which made offers with slightly different repayment profiles look more different than they really were. I’m now making a three-year table with interest, all upfront or added fees, monthly payment and balance remaining.

I do not yet know whether I will move during the fixed period, so I’m asking for the portability conditions and the early-repayment schedule in writing before deciding.

 

[planTheWorkshop]

Since moving is possible, I would price two scenarios rather than trying to predict one: keep the mortgage for all three years, and redeem it earlier. A slightly dearer deal with less painful early repayment could be rational if the chance of moving is meaningful. For portability, establish what would still need approval at the time; the word itself should not be treated as an unconditional promise.

 

[bakesAndView]

One more caveat: don't let the three-year total obscure monthly affordability. An offer can be cheapest overall but still leave too little room for service charges, repairs and other ownership costs. I’d also model the payment after the fix using a higher assumed rate, without assuming a favourable refinance will definitely be available.

 

[miro_ash]

Ask each lender or broker for figures on exactly the same loan amount, term and repayment basis. Then request versions with the fee paid upfront and, if permitted, added to the loan. That should expose whether the apparent saving comes from the rate, the fee treatment or crossing an LTV tier. Finally, read the overpayment and early-repayment wording together, as flexibility during the fix may have real value.