8th February 2016
Would-be mortgage borrowers are being hit with ever-rising costs as new research has found that the average home loan fee has jumped to hit a 21-month high.
The analysis from Moneyfacts.co.uk concluded that mortgage fees are now typically £68 higher than in June 2014.
On the plus side however, given the prolonged backdrop of interest rates having been stuck at 0.5% for almost seven years, the current mortgage market boasts some of the lowest rates on record, which is great news for borrowers.
But Charlotte Nelson, finance expert at Moneyfacts.co.uk believes that the increase in the average mortgage fee clearly shows that some of these headline-grabbing rates are being compensated for elsewhere.
She said: “Some of the fees borrowers are being asked to pay are nothing short of shocking, with up to £7,499 being charged for some high value loans.
“While arrangement fees allow lenders to offer a lot more flexibility within their ranges, the cost of administering the mortgage does not vary that greatly from one case to the next, which could lead many to wonder why there is such a big difference between the fees charged and why they are even charged in the first place.
“It’s certainly great news that the Council of Mortgage Lenders (CML) are involved in looking at the consistency in the market to help borrowers when they compare fees, but this will have no impact on the amount charged.”
High fees can ultimately have a big impact on the cost-effectiveness of a deal, particularly when they are added to the mortgage advance, which increases the amount borrowed and pushes up the size of the monthly repayments.
Nelson added: “In the current low-rate market, borrowers are being counselled to switch deals once their fixed rate comes to an end, but large fees can make moving to a new deal a costly affair, particularly if borrowers prefer shorter-term mortgages.
“Borrowers would therefore be wise to look at the true cost of the mortgage, taking into account any fees and incentive packages, to ensure that the most cost-effective deal is obtained.”
|Average Mortgage Fee||£888||£924||£922||£956|
|Average Fixed Mortgage Fee||£889||£925||£926||£964|
|Average Variable Mortgage Fee||£885||£922||£910||£933|
|Source: Moneyfacts.co.uk||Compiled: 8.2.16|