Mortgage rates at record low – but fees rising
The number of products on the market has also increased by 37% since last summer. The comparison website attributes both these positives to the Government’s Funding for Lending Scheme, under which £80bn of finance has been made available to banks and building societies on condition that they lend it on in the form of cheaper mortgages and loans to small businesses.
However, it points to a sinister trend when it comes to the fees charged on mortgages, with the average application fee for fixed rate deals up 17% and for tracker products up 9% since last August.
The inference is that, while lenders are sticking to the rules and lending on money at cheaper rates, they are hiking up fees to compensate and maintain their margins.
Clare Francis of Moneysupermarket.com said: “It’s very easy to be attracted by low headline rates when looking at mortgages, but you must also factor in the fees you’ll be charged to take the mortgage out. Set-up costs can vary greatly between providers so taking the time to work out the total amount you have to repay over the term of the offer is essential.
“When comparing mortgages you should always look at the total amount you would repay, including fees, over the term of the deal.”
Looking at fixed rates in more detail, moneysupermarket revealed that, since June 2012, the number of two-year fixed deals on offer has soared by 138%, while the average interest rate charged has come down by 0.89% to a low of 3.56 per cent.
The number of five-year fixed rate mortgages has increased by 51%, while the average rate has dropped 0.70% in the same period.
However, application fees on two-year fixed rate mortgages have risen by 30% in that time, to an average of £1,033, while five-year fees have increased by 22% to an average of £883.