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Buyers beware – increasing mortgage fees

Report warns of the growing number of mortgages with arrangement fees in an apparent bid to gain margins.

Richard Reed

mortgage fees

Buyers should beware the growing number of mortgage fees and find a good broker.

Mortgage fees on fixed-rate products have risen by 5.6% over the past year, with the average deal charging £1,075.

Meanwhile the percentage of the market where fixed-rate products are offered without a fee has shrunk by 5% over the same period to 35%.

That is the message from Moneyfacts.co.uk, which warns that lenders may be raising fees to gain margins in the aftermath of a fixed-rate war.

Its latest report warns this may also be linked to the resurgence of sub-1% mortgages as, while eye-catchingly low, these initial rates can also carry the highest fees.

“Borrowers may need to search a little harder if they are looking to keep mortgage costs to a minimum or secure a fixed rate mortgage without a fee,” says Eleanor Williams, finance expert at Moneyfacts.co.uk.

“Our latest data shows that current average fixed mortgage rates at all LTVs for deals with a fee (3.08%), and for those without a fee (2.87%), are both over 0.50% more than they were this time last year.”

Key findings include:

  • At £1,075, the average fee currently charged on a fixed-rate mortgage deal (not including no-fee products) has increased by £57 year-on-year. However, it has fallen by £6 compared to April when it was £1,081, which was the highest on Moneyfacts records since November 2012 (£1,095).
  • The proportion of the market offering fixed-rate mortgage deals that do not charge a fee has reduced from 40% in June 2020 to 35% at the start of this month.

mortgage fees

“These changes strengthen the need for borrowers to secure the support and advice of a qualified broker who can help to assess the true cost of a deal, carefully looking into whether or not it is beneficial to pay a fee or to stomach a slightly higher initial rate and consider what, if any, incentives may be important for their customer,” adds Williams.

June 27, 2021

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