Average mortgage fees rise by 17%
The average mortgage fee has risen by £151 over the past year, according to Moneyfacts.co.uk.
An average arrangement fee now stands at £1,030, an increase of 17% year-on-year.
The most expensive fee comes from Accord Mortgages at £3,800, while Precise Mortgages charges the highest percentage fee at 2%.
Moneyfacts.co.uk found that only 12% of mortgages charge no arrangement fee.
Drop in mortgage rates
News of higher arrangement fees comes as the average five-year fixed-rate mortgage drops under 5% for the first time.
The average rate on a five-year fix now sits at 4.99%, with Chelsea Building Society recently launching a five-year fixed product at a record low of 3.39%.
In addition, the average two-year fixed rate has fallen to 4.24%, while a three-year fixed rate has slipped to 4.74%.
Recently, Nationwide Building Society slashed its two-year fixed-rate products by 0.25% and selected three-year mortgages by 0.5%, while Skipton Building Society has cut rates on its three-year fixes by up to 0.3%.
David Hollingworth, mortgage expert at independent broker London & County, says the slashed rates come with the expectation that an increase in interest rates is unlikely in the near term. "However, the attractive pricing of fixed rates is a real boon to those that want to take out uncertainty in their mortgage payments," he adds.
Michelle Slade, spokesperson for Moneyfacts.co.uk, says that lenders are "offsetting" the low rates with higher fees.
"Unfortunately too many borrowers still focus their initial attention on getting the best rate, without taking full consideration of the true cost of the deal. In many cases a low rate with a high fee can work out more expensive than opting for a slightly higher rate, but with a lower fee."
This article was written for Money Observer
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
A charge some brokers (and, increasingly, lenders) make for arranging your loan or mortgage, either as a flat fee or a percentage of the amount you wish to borrow. In order to look ultra-competitive in the best-buy tables, some mortgage lenders will offer mortgages with an attractive low rate and recoup any losses with a hefty arrangement fee.