Upfront mortgage fees fall
Average mortgage product fees have fallen over the past year by around £18, while the number of fee-free options on the market have increased by 80%.
Average mortgage product fees have fallen from £1,075 in June last year to £1,057 currently. But, according to data site Moneyfacts, this figure is still above the average product fee recorded in June 2020 of £1,018.
The highest average product fee over the past year stood at £1,090 in September which came at a time when several lenders were offering sub-1% deals. This compares to the highest mortgage product fee recorded by Moneyfacts of £1,106 in 2012.
It added that fee-free deals have grown from 959 in June 2020, to 1,735 in June this year. This accounts for around 40% of the deals in the fixed mortgage market.
Deals with free or refunded legal fees have also increased from 1,816 in June last year to 2,203, which is 51% of the market.
Offers with free or refunded valuation have gone up from 2,695 in same period last year to 3,105 in June this year, while cashback deals have risen from 1,108 in June last year 1,350 in June this year.
Meanwhile the gap between average rates for deals with a fee and deals with no fee had contracted, going from 0.21% a year ago to 0.03% now.
Substantial savings by switching
Rachel Springall, finance expert at Moneyfacts, said that despite mortgage rates rising there was still an “abundance of options” for borrowers to save on upfront costs of mortgage deals.
She said: “Mortgage fees have fallen on average on fixed deals, and there are now more fee-free offers available. Weighing up a deal on its true cost is vital, particularly as the rate gap between average fixed rates with a product fee and those without has reduced.”
Springall continued that due to changes in the mortgage landscape borrowers would be better off looking past the fixed initial rates, especially as interest rates continued to rise.
“Back in September 2021, there were various lenders offering sub-one per cent mortgage deals, but that same month the average mortgage fee was just £16 shy of the record high recorded in 2012. Low rate fixed mortgages can carry some of the highest fees, so they may not be the best choice for every borrower, so seeking independent advice to assess the overall deal is wise,” she explained.
Springall said that remortgage customers could make “substantial savings” by switching their mortgage and there were fee-free offers and deals that covered legal fees, valuations or offered cashback. She added this could benefit first-time buyers especially.
“In the months ahead, it will be interesting to see how mortgage lenders will adapt their ranges to appeal to both new borrowers and their existing customers during the cost-of-living crisis,” she said.