Mortgage application fees rocket 20%
Mortgage customers could be paying over the odds for borrowing due to high fees, according to a report by Moneysupermarket.com.
The research found mortgage products had increased by around 20% since 2009, meaning consumers now found it more difficult to judge the real cost of their mortgage.
It added that products with the lowest interest rates would often turn out to be poor value when fees and charges were added, unless true cost figures are used to compare deals.
“For example, the lowest two-year fixed rate mortgage is from HSBC at 2.64%. However adding the combined booking and arrangement fee of £1,999 means the total amount to be paid back over the two years for someone borrowing £150,000 is £18,404.20.” the study said.
“The same amount borrowed over two years with Bank of Ireland at a higher rate of 2.78%, and a fee of only £799, would cost £17,461.48 – a saving of £942.72 over the two year period, despite the interest rate being 0.14 percentage points higher.”
Andy Pratt, chief operating officer at mortgage brokerage Alexander Hall, commented:
“The market is a different playing field to how it has been in the past. But while the cost of mortgages has gone up, it doesn’t necessarily mean clients will pay more when fees are paid up front.
“Lenders have increased upfront costs to make sure their initial costs are covered, with more focus on the initial application. “The different structures for fees mean there is now even more reason to consider a broker, especially if things have changed since the last time a client took out a mortgage.”
Clare Francis, mortgage expert at MoneySupermarket.com, added:
“It’s very easy for borrowers looking for a new mortgage to be attracted by low headline rates; however it is vital to consider the account arrangement and booking fees as part of the overall cost.
“That said, for some people it may be worth paying a high fee in order to benefit from the lowest interest rate. It will all depend on the amount you are looking to borrow – on large mortgages a high fee can be worth paying in order to secure a low rate.”