Borrowers Warned Of Rising Mortgage Costs

As lenders set differing charging structures with rising costs for such as application and booking fees, borrowers are warned to look beyond headline mortgage interest rates.

According to moneysupermarket.com, the price of setting up a mortgage has risen over the last 18 months.

Borrowers are faced with a myriad of different mortgage pricing structures from lenders, making it all the more difficult to assess the true cost of a mortgage.

Research shows that since September 2009, the average application fee for fixed rate mortgages has risen by almost £100 and for tracker mortgages by nearly £120.

In order to offer lower headline mortgage interest rates, lenders have moved to increase their administration fees.

These fees can either be charged as a fixed amount or as a percentage of the mortgage amount, sometimes up to 3.5% of the loan size, so it’s important for consumers to understand how this will impact the total cost of the mortgage before applying.

Clare Francis, mortgage spokesperson and moneysupermarket.com commented “It’s vital that prospective mortgage customers look beyond the headline rate and dig a little deeper to find out the true cost of the mortgage, otherwise they may end up paying back more than they bargained for.”

She added “On the face of it, low interest rate products might seem like the obvious choice, however, they don’t necessarily offer the best option for consumers. High fees, especially those charged as a percentage of the total amount borrowed, can significantly bump up the cost over the term of the mortgage.

Likewise a low application fee will not necessarily lead to a cheaper overall deal: in some cases it may work out cheaper to pay a higher arrangement fee. It will all depend on the amount you are looking to borrow.”