Mortgage fees hit 25 year high
According to data from Moneyfacts.co.uk, mortgage arrangement fees have already risen by £112 this year, increasing from an average of £1,410 in January to £1,522 by this April.
In January a two-year fixed rate mortgage up to 90% loan to value (LTV) came with an average interest rate of 5.12% and a fee of £921. By April the rate had fallen to 4.59%, but the fee risen to £1,423.
The same deal at 75% LTV was in January charged at an average rate of 3.98% with a fee of £1,531, with the rate now fallen to 3.5% and the fee risen to £1,736.
Mortgages on five-year fixed rates have followed a similar trend, although the fees are lower than the two-year fixed rates at lower LTVs, coming in at £1,433, £1,258 and £1,268 for 90%, 75% and 60% LTV respectively.
As a rule of thumb, the larger your mortgage, the more significant the interest rate and the less important the fee, hence this trend has been more damaging to those with relatively small mortgages.
Sylvia Waycot of Moneyfacts.co.uk said: “It’s easy to get caught up in the excitement of heavily marketed mortgages that shout about low interest rates, but beware that they will often be at the expense of high fees.
“‘The average fees charged have risen by almost 8% since January, though it is hard to justify how setting up costs can possibly have risen by this much.
“Rates are only part of the story; high upfront charges such as fees can easily be overlooked and yet their impact across the life of the mortgage can turn a cheap deal into a costly one and therefore should always be considered,” she said.
“If the Government is serious about re-kindling the mortgage market with its Funding for Lending scheme, it should ensure all its subscribed lenders offer mortgages that exclude hiked up charges that are hidden behind low rates.”