Mortgage lenders are continuing to increase the set up fees that they charge for their fixed rate mortgage deals as consumers look to protect themselves from future base rate increases.
According to inflation data just published by the Office for National Statistics, the cost of "miscellaneous goods and services" was being driven upwards by mortgage arrangement fees and foreign exchange charges.
Although interest rates remain at a record low, consumers are having to pay more in many cases to secure the cheapest home loan deals.Typically an arrangement fee will be in the region of £1,000, but we have started to see the odd deal come in with a £1,500 or £2,000 charge. These deals will typically charge lower interest rates, though.
Leeds Building Society had recently launched a two-year discount deal with an upfront fee of £2,999. This loan charges a current interest rate of 2.54pc, although the rate will rise as and when the Bank of England pushes up interest rates.
Skipton Building Society has also increased its fees. Rather than charge one arrangement fee, it now levies an upfront "application fee" of £195, followed by a further "completion fee" of £995 once the mortgage is secured. This, has pushed up the total fees paid by customers.
For those with larger mortgages it can make sense to pay a larger upfront fee if this secures a lower mortgage rate, however there was a growing trend for mortgage providers to charge a percentage fee, where the arrangement fee was 1.5pc or even in some cases 2.5pc of the amount being borrowed. Clearly this can be costly for those with larger mortgages.
In the past many lenders allowed people to add this fee to their mortgage. Now some require customers to pay it upfront. Clearly, given the economic situation, some people will struggle to find this money, so may end up going for a mortgage with a lower fee but higher interest rates as a result – which in some cases will cost them more over the long term.
For more information about the key issues in the mortgage market, go to Mark's Mortgage Blog here
Add a Comment