Over a third of mortgages are now fee-free according the latest data from Moneyfacts.co.uk.
It has revealed 40% of mortgages on the market now come without arrangement fees as the ‘zero fee’ mortgage market has grown by 274 since January to reach 2,007.
People are being warned, however, that while the number of fee-free deals has increased, the average fees have also headed upwards rising from £979 in May to £990 today.
This means anyone considering signing up to a mortgage with an attractively low rate, should also check the additional charges as well.
Charlotte Nelson, finance expert at Moneyfacts, said: “Providers have always used fees to compensate for a lower rate so borrowers now must become wise to this tactic, particularly with more no-fee deals on the market.”
She added: “Many borrowers focus on achieving the cheapest possible deal, and while this should be admired, they may be missing out on offers that could be more cost-effective in the long run.
“For example, borrowers opting for the lowest two-year fixed-rate deal at 75% loan-to-value would be £1,131.80 worse off compared to someone opting for the lowest deal without a fee.”
Competition amongst lenders
Moneyfacts figures were released as Yorkshire Building Society announced it was unveiling a new range of remortgage options with no upfront fees including some five-year fixed rate deals.
It said it wanted to provide borrowers with more competitive longer-term options in the midst of speculation about a Bank of England (BoE) rate rise. Ahead of the last rate rise in November 2017 the building society said it saw a surge of borrowers turning to fixed-rate mortgages.
Indeed Moneyfacts said many lenders had kept their rates static as they waited to see whether the base rate rise would come to fruition. By reducing some of their fees to zero, said Nelson, providers would be able to remain competitive among their rivals.
She added: “A fee-free deal does not mean borrowers will have no fees whatsoever to pay, as there are other costs such as valuation and legal fees to keep in mind.
“Getting a mortgage is daunting enough without having to work through the maze of fees. However, it is important that borrowers research thoroughly, comparing the true cost of any deal, so they can be sure to get the most cost-effective option for them.”
