Mortgage application fees have risen by an average of 13 per cent over the past couple of years, according to new research from Moneysupermarket.
The comparison site says that this makes it increasingly difficult for borrowers to accurately compare the costs of their home loan. It points to the current lowest two year fixed rate deal, from Santander, at 2.79 per cent. This deal comes with fees totalling almost £2,000, which over the course of the two years adds nearly £100 a month to the cost of the loan.
Meanwhile, Bank of Scotland has a higher rate of 2.99 per cent, but fees of just £499. Depending on the size of your mortgage, this could turn out to be a much better deal.
Clare Francis, mortgage spokesperson at moneysupermarket.com said: “When looking for a new mortgage, it’s easy to be lured in by low headline rates, however it is vital borrowers take into account arrangement and booking fees as part of the overall cost. The size of the fees can vary greatly, with some providers offering fee-free deals while the set-up costs on other mortgages can run into thousands. It is therefore vital to work out the total amount you’d repay over the term of the offer.
“That said, for some people it may be worth paying a high fee in order to benefit from the lowest interest rate. It will all depend on the amount you are looking to borrow – on large mortgages a high fee can be worth paying in order to secure a low rate. However, with smaller mortgages, where a high fee will form a larger proportion of the overall loan size, it may work out cheaper to keep the set up costs low even if it means paying a slightly higher monthly payment.
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