Despite a large number of mortgage lenders driving their rates down to record lows over recent months, arrangement and booking fees have been steadily rising. During the first three months of this year, fees have risen by £112, with average fees in the high loan-to-value market increasing the most.
A typical five-year fixed rate mortgage with a 90% loan-to-value today has an average fee of £1,433 compared with £929 in January this year. The average fee for a deal over the same term with a 75% LTV has a typical fee of £1,258 compared with £964 at the start of this year.
Sylvia Waycot, Editor at Moneyfacts.co.uk, warned that whilst many mortgage deals offer competitively low rates, it is always wise to be aware of the hefty fees involved.
She commented:
"It's easy to get caught up in the excitement of heavily marketed mortgages that shout about low interest rates, but beware that they will often be at the expense of high fees."
"The average fees charged have risen by almost 8% since January, though it is hard to justify how setting up costs can possibly have risen by this much.
"Mortgage lenders that are enjoying cheap funding for lending, courtesy of the Government, must be seen to be opening up the market to new borrowers and reducing rates will help with this message.
"Rates are only a part of the story; high upfront charges such as fees can easily be overlooked and yet their impact across the life of the mortgage can turn a cheap deal into a costly one and therefore should always be considered.
"If the Government is serious about re-kindling the mortgage market with its Funding for Lending Scheme, it should ensure all its subscribed lenders offer mortgages that exclude hiked up charges that are hidden behind low rates," concluded Ms Waycot.
