Fee Free Mortgages.

by Mark Johnston

Fee Free Mortgages.

It appears that as a result of the funding for lending scheme, many types of mortgages have never been cheaper.

Banks and building societies have cut interest rates on many of their mortgage deals to the lowest ever levels, but it now appears that the back door hike in mortgage fees wipes out the benefit for many buyers.

David Hollingworth, from mortgage broker London and Country, says “the increased level of competition in the market is great news. However, it is always important for borrowers to look beyond the headline rate”.

In the past lenders generally charged a fee just to cover the costs they incurred administrating the mortgage, but it appears that today many lenders rely on these fees to bring them in extra revenue.

Figures have revealed that mortgage fees are now at their highest in 25 years despite government efforts to make borrowing easier and cheaper.

Currently these fees  now average more than £1,500 a month, this means that the average arrangement fee has increased by nearly 75 per cent in just 5 years.

Therefore nowadays one of the largest costs to a mortgage is the fees.

Some experts believe that this rise in fees is especially hard on first time buyers as they are already struggling to raise large deposits and therefore they cause yet another barrier to home ownership.

Data has shown that fees have increased by £112 in the last 4 months alone, a rise which Moneyfacts, a leading personal finance data provider, said is “hard to justify”.

However, as the mortgage market is so competitive at the moment, some lenders are now opting to launch ‘fee free’ products in order to encourage borrowers to take out their mortgages with them.

So it seems with this in mind Santander has recently decided to launch a new zero fee mortgage range.

The bank will now offer a range of 2, 3 and 5 year fixed and tracker products which are available on mortgages between 85 per cent and 90 per cent loan to value (LTV). Also all the new zero fee products are available with a free valuation and even better…..£250 cashback.

Phil Cliff, director of Santander mortgages, said “as one of the major mortgage lenders in the UK we continually review our product offering to help customers in the current tough economic climate”.

It also appears that Abbey, the intermediary lender, has also launched a range of fee free higher loan to value (LTV) with rates starting from 4.29 per cent on a 2 year fix available up to 85 per cent.

A 2 year fix of 4.75 per cent up to 90 per cent loan to value (LTV) is also available. In addition a 3 year fix of 4.89 per cent which is also available up to 90 per cent loan to value (LTV).

Miguel Sard, Abbey’s managing director, says “we are delighted to support higher loan to value borrowers with our new range of fee free products. We expect there to be strong demand for these highly competitive new deals”.


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