Mortgage providers are charging their customers a total of 39 different types of fee, making it difficult for consumers to work out which are the best deals.
New research by Which? Money has also found that the level of fees has gone up since the financial crisis, with four in five two-year tracker mortgages for 90% of the property’s value charging over £990 in set-up fees in 2010, compared with one in five in 2007. You are now more likely to be charged a fee than in 2007.
Set-up and additional fees can include anything from booking, administration, arrangement and valuation fees, to charges for falling into arrears, changing from interest-only to repayment and even for choosing to take out your buildings insurance with someone other than your mortgage provider.
Most lenders now charge more than 20 types of additional fee, with Newcastle Building Society leading the way on 29, closely followed by Ipswich Building Society (28) and several others on 27. However, a handful of providers have kept the number of charges to a minimum – Stafford Railway charges just three types of fee.
Don’t be fooled by cheap mortgage rates
The result is that comparing mortgages is much more complex than it used to be as deals with attractive headline rates could end up costing customers more once all of the fees are added on.
For example, at 1.99% Cheltenham & Gloucester’s two-year tracker at 50% LTV looks like a great deal. However, once you add on the £2,949 in set-up fees, it actually costs £2,435 more over the two-year duration of the deal than the equivalent mortgage with First Direct at 2.19%.
Which? Money editor, James Daley, said: ‘Finding the right mortgage used to be as simple as looking for the best rate but the array of fees nowadays has made it a much harder task – it’s never been more difficult to understand how much your mortgage is going to cost you.
‘Lenders should make it clear what the total cost of a deal is so borrowers can make easy comparisons.’
To find the cheapest deals for your circumstances visit the Which? mortgage comparison tool, which lets you compare deals by total cost.
If you have been confused by mortgage fees, have your say on Which? Conversation.
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