Northern Rock is the latest company to join the current trend amongst the UK mortgage lenders. Just like the likes of Nationwide, HSBC and Abbey, Northern Rock has decided to cut the cost of their fixed rate mortgage loans.

On average, from the five biggest mortgage lenders, the cost of fixed-rate mortgages has now dropped to around 6.43 per cent however; these new lower rates do come at a cost. The new rates that Northern Rock offer also includes an arrangement fee of £1,495, suggesting that burrowers are able to receive attractive deals but will be required to make a larger deposit in order to obtain them. Currently Northern Rock’s rates stand at 5.89 per cent with a 25 per cent deposit, 6.34 per cent with a 20 per cent deposit, and an increase of 7.19 per cent with a 10 per cent deposit.

According to research conducted by Moneyfacts.co.uk, (based on a £150k repayment mortgage) a £100 in fee would equate to a 0.06 increase in rate. This would therefore mean that a customer was only benefitting from a net 0.09% reduction in the average rate, instead of the full 0.15%.

As many lenders continue to cut their fixed rates one might question how they compensate it as this is unlikely to be advertised as the attractive rates offered. Recently mortgage advisors are warning burrowers to check their lending deals thoroughly and not simply be enticed by the headline rate, but instead, to chase after the deals that are truly beneficial to them.