Mortgage fees rocket

Research from Moneyfacts reveals that average mortgage fees have reached a new high.

Research from Moneyfacts reveals that average mortgage fees have reached a new high.

A year before Bank of England  base rate fell to 0.5 per cent the average fee was just £889. Four years later, the average fee has risen by 70 per cent to its current level of £1,514.

Today, most people are interested in fixing their mortgage payments. The average two-year fixed fee is £1,565 and a 75 per cent loan-to-value (LTV) offers an average rate of 4.31 per cent while the five-year fix is slightly less at £1,014 and the average 75 per cent LTV will cost 4.19 per cent.

Moneyfacts says the highest fee it has found is through Legal & General Mortgage Club, which is offering a product via Accord Mortgages (a subsidiary of Yorkshire Building Society).  The fee is £3,990 on a 75 per cent LTV fixed for five years at 3.79 per cent so in this case, the higher fee earns you a lower overall rate. But this doesn’t follow across the board. The Post Office offers a two-year fixed 75 per cent LTV at 3.65 per cent with no fee.

Sylvia Waycot, finance expert at Moneyfacts, said: “There is no logical reason why fees should have increased so much. In the space of just August and September alone, they have increased by an average of £42. Mortgage administration costs can’t have jumped 70 per cent. Credit searches are no more complex than in previous years, so why are fees so high?

“It could be that lenders are keen to push fees because they are an upfront cost, which means they get the money at the start regardless of fulfilling the full length of a fixed term. And should you not fulfil the full length of the fixed term, well that can open the door to a whole host of other upfront charges.

“Doing your homework before choosing your mortgage is key. Mortgages have always been complicated, but these days that complication has sadly been taken to a whole new level.”