Mortgage fees soar to make up for reduced rates
Arrangement fees are being used increase the price of mortgages
September 10, 2012
Upfront mortgage fees have increased by 70% in just four years while lenders state that mortgages are a bargain. The repayment rates, which are usually used to say whether a mortgage is cheap or not, have been falling for several years. Over the last four years the average two year fixed mortgage rate has dropped from 6.34% to 4.57%. The Bank of England’s base rate hasn’t moved from 0.5% since March 2009 which has resulted in lowered rates. However, new research suggests that mortgage companies are compensating for falling rates by racheting up the cost of fees.
The comparison site Moneyfacts.com suggest that the average arrangement fee has gone up from £924 in September 2010 to a whopping £1,514 today. In fact average arrangement fees have increased by £42 in the last 5 weeks. Finance expert Sylvia Waycot of Moneyfacts.com said that she believes the reason for the huge increases is that mortgage providers are keen to make as much money up front because so many people change providers during the life of their mortgage. She emphasised the need to “do your homework” because “mortgages have always been complicated, but these days that complication has sadly been taken to a whole new level.” To find out more about how to choose a mortgage read our guide here.