New research from Moneyfacts has shown that mortgage fees have increased by 70% over the past three years.
Borrowers have also been hit by a rise in Standard Variable Rates (SVR) during that time, despite the fact that Bank of England Base rate has remained at 0.5% for over three years.
Rising mortgage fees
The data shows that the average fees payable to arrange a mortgage have risen from £878 in 2009 to £1,511 in 2012, with some of the lowest mortgage interest rates costing far more.
It is clear that as lenders have reduced interest rates on their products for home movers and remortgages they have increased the fees payable to maintain their profit margins.
Lowest interest rate v higher fees
With many Standard Variable Rates (SVR) rising over the past few months borrowers have been looking into the possibility of remortgaging onto a better deal.
However mortgage experts have warned homeowners, as well as people wanting to buy a new property, not to be drawn in by headline grabbing rates and to make sure they factor in arrangement fees, which could render otherwise attractive rate uncompetitive.
People looking for first time buyer mortgages should be especially careful as they may lack the experience necessary, having not bought a property before, to compare different mortgage products.
Mortgage advisers recommend that borrowers calculate the total cost of the mortgage, generally over the term of any special deal, by including interest payments and all fees; only by doing this can a borrower compare the true cost of a loan. It is possible that deals with the lowest interest rates and higher arrangement fees will actually work out to be more expensive than a product with a slightly higher interest rate but lower arrangement fees.
Whether a borrower is better off paying a higher arrangement fee to secure a lower rate of interest generally depends on the loan size. As a rule of thumb higher arrangement fees with lower interest rates are generally more competitive for larger loans. However, for smaller loans the arrangement fee can work out to be a large percentage of the amount borrowed and are often not worth paying.
Your property may be repossessed if you do not keep up repayments on your mortgage.
For providing mortgage advice we will charge an application fee of £299 and we may also be paid a fee from the lender, any fee paid by the lender will be disclosed to you. Alternatively we will charge an arrangement fee of 0.5% of the loan and refund to you any payment received by us from the lender.