by Mark Johnston
Hefty Mortgage Fees.
When the credit crunch hit in 2008, lending froze and it was virtually impossible to get a mortgage.
It appears then that the mortgage drought is all but over as competition has returned to the mortgage market and rates are dropping.
However, due to the return of competitiveness within the mortgage market, lenders are now concentrating on high headline rates that push their products to the top of the best buy tables, but many of these products have higher than ‘norm’ fees.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said “banks and building societies are well known for giving with one hand and taking with the other”.
Recent research shows that the cheapest mortgage rates on the market at the moment all carry at least a £1,695 fee for a 2 year fix, while 5 year rates carry even higher fees.
Other figures show that the average mortgage fee is currently more than £1,400, compared with £918 just 3 years ago.
These increases come despite the introduction of the bank of England’s funding for lending scheme, which around 13 banks and building societies have signed up to.
Aaron Strutt of Trinity Financial, the broker, suggest “lenders consistently lower their mortgage rates but are not so quick to reduce arrangement fees”.
Current arrangement and valuation fees can substantially ‘bump up’ the overall cost of a mortgage by over 2 per cent, especially on fixed rate deals, new research has revealed.
Therefore, banks and building societies have been accused of packaging supposedly cheap home loans with hidden costs, which run into thousands of pounds.
David Whittaker of Mortgages for Business, states that “lenders fees vary enormously and this can make headline rates extremely misleading”.
David Hollingworth from mortgage broker London and Country, said “some new deals had such high fees that the headline rate was almost meaningless”.
A spokesman for Moneyfacts.co.uk, a financial advice company, added “often with these low priced deals they are compensated by a large arrangement fee”.
Experts warn that as some new deals are not what they seem those who are looking to currently buy a home should try to look past the low headline rate and look at all aspects of any mortgage deal.
These fees go by lots of different names, some lenders refer to them as arrangement fees whilst others call them product fees, booking fees, completion fees or administration fees.
Clare Francis, the mortgage expert from Moneysupermarket.com, a comparison website, explains that “fees have increased so much over the years that it is becoming harder to justify how the fee is representative of the administration costs involved”.
Nevertheless it can true that for some borrowers it may be worth paying a high fee in order to benefit from the lowest interest rate, but this does depend heavily on the size of the loan.
In conclusion although many lenders say they are trying to make it easier to get a mortgage at the moment, in reality getting on the property ladder is just as difficult as it has ever been.
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