Average mortgage arrangement fees have increased by almost 70% over the past three years, pushing up the costs of buying a home and re-mortgaging.
Since 2009, the average mortgage arrangement fee charged for a residential mortgage has risen from £878 to £1,479. And in the last year alone, arrangement fees have risen by more than a third from £1,099.
A number of factors could be responsible for driving up costs, including less competition in the market. Lenders are also experiencing higher admin and regulatory costs in a risk-averse market.
Low fees no guarantee of best mortgage deal
The rise in average mortgage fees has made it more challenging to choose the right mortgage deal. A low headline interest rate may be a false economy if you end up paying higher fees. Conversely though, no-fee and low-fee options may come with higher interest rates. If you plan to switch your mortgage frequently, a low-fee mortgage deal could be best. If, however, you plan to stay with your mortgage provider for a longer period, it could be worth paying an up-front fee in order to enjoy a lower interest rate going forward.
Lenders increase range of fees they charge
As well as an increase in the level of mortgage fees, a Which? investigation last year found that the number of different types of fee imposed by mortgage providers is also on the increase – with some lenders charging more than 30 different types of fee to their customers.
These fees and charges cover all manner of things – from fees for storing your house deeds through to arrears fees, overpayment fees, change-to-length-of-term fees and even fees for buying your buildings insurance from someone other than your lender.
We believe you should take independent advice before choosing a mortgage. The Which? Group offers an independent mortgage advice service that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased website.
If you’re looking to find out what your repayments would be at different interest rates, or want to get an idea of how much you could borrow, try the mortgage calculators offered by Which? Mortgage Advisers.