Higher Mortgage Fees

by Mark Johnston

Everyone knows that we should always read the fine print when we buy something or take on a service.  But do we, I don’t and someone once said to me that the more fine print there is the less I should trust that company or organisations.  So where does that leave us on the subject of mortgage rate fine print.  There is an awful lot of fine print and the tricks that lenders use to etch out more cash from would-be buyers are becoming increasingly convoluted. 

Mortgage customers be warned, comparison websites warn users to read all the details of the rates and offers on display.  One of the leading comparison websites revealed that there has been a 15 per cent increase in application fees recently, something to take into consideration.    

Since September 2009, the average fixed rate product has seen an increase of £97 on an application and fixed rate mortgages customer have seen an increase of £118 for the same period, an increase of 15 per cent.  These application fees are a slightly underhand method for lenders to make additional cash from would be homeowners.  Traditionally, the administration surrounding a mortgage application costs money and naturally it would be fair to pass these charges onto the borrower.  However, in recent years, in an effort to maintain a healthy customer base and appear to have the best rates, lenders are lowering their headline rates while increasing their “administration” charges and booking fees. 

These are generally paid as a percentage of the mortgage or as a one off charge but can be up to 3.5 per cent.  With an average house costing £160,000, this would mean a £5,600 administration charge.  What administration are they doing? 

When taking out a mortgage these days, it would be prudent to read more than just the highlights and take these charges into account.  Clare Francis, spokesperson for Moneysupermarket.com mortgages has warned that low interest rates may seem like the most obvious choice initially but they may not offer the best product for the consumer.  She also said “High fees, especially those charged as a percentage of the total amount borrowed, can significantly bump up the cost over the term of the mortgage.  Likewise a low application fee will not necessarily lead to a cheaper overall deal. In some cases it may work out cheaper to pay a higher arrangement fee, it will all depend on the amount you are looking to borrow.”  Ms Francis went on to say that “People often forget to look at the total cost and simply focus on the interest rate and what their monthly repayments will be when comparing mortgages.  They fail to factor in the impact of the fee. Borrowers need to shop around to make sure they get the right mortgage to suit their needs.”  So be warned, hidden charges and costs are rife in the mortgage market these days so do your research and investigate all options.

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