by Mark Johnston
Mortgage fees on the rise.
When getting a mortgage it can seem that there are just fees, fees and more fees! Whether you are a first time buyer or re-mortgaging, you will have to pay some sort of fees to lender to cover the costs of either finishing the mortgage or setting up a new one. Some lender will allow these fees to be added to the mortgage.
Currently an increasing number of lenders are charging fees that are a percentage of the loan amount, say 1% or 1.5% rather than a fixed fee, they do this so that the mortgage itself looking like a really good deal.
Even though rates have been falling in recent months, fees have been rising and this is due to lenders hiking them to compensate the fall in rates.
Sylvia Waycot, of moneyfacts.co.uk, said “increasing fees is a way for lenders to boost revenues, particularly if they are cutting rates on new deals”.
“Lenders have been offering some extremely competitive mortgage rates of late. While margins have been slim, they have made up for some lost profit by raising their arrangement fees” said Mark Harris, chief executive of mortgage broker SPF Private Clients.
Research by consumer group Which? found that the average mortgage fee in November 2005 was just £411, more than £1,000 less than figures today.
New figures from moneyfacts.co.uk, the financial information website, showed that the average cost of securing a home loan now stands at £1,511, up from £878 in 2009 and in certain cases a fee of £2,000 to get the best rate is payable.
Figures from Moneysupermarket.com, the comparison website, have found that banks generally trump the building societies when it comes to the cost of mortgages specifically for first time buyers, however the average 2 year fixed rate mortgages from building societies and banks offer similar rates, there is a big difference between the arrangement fees attached.
It seems that overall building societies offer much lower arrangement and booking fees and these could potentially help the consumer to save over £700 over the term of the mortgage deal.
Some banks do however offer some fee free deals and some of the best on offer at the moment are from:
– Natwest, who is offering a 2 year fixed rate at an interest rate of 3.35% on mortgages up to 60% loan to value (LTV)
– First Direct offers a 5 year fixed rate of 4.99% on loans up to 90% loan to value (LTV)
– HSBC’s lifetime tracker charges at 2.79% over bank rate for the term on mortgages up to 70% loan to value (LTV) with no fee, or up to 80% loan to value (LTV) with a £599 fee.
In conclusion, lenders in general are well known for giving with one hand and taking with the other, which is why the bargain low rates come at a price and it can be a price that is often not worth paying!
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