Mortgage Fees Rise in New Squeeze on Borrowers

Application fees for mortgages have risen 13% in the last two years. But how do you calculate which is the best deal when APR isn’t the only measure?

The cost of mortgages can’t simply be judged by just looking at their APR. Research by Moneysupermarket.com has found that fees paid when applying for fixed and tracker mortgages have risen 13% since September 2009.

This makes the true cost of mortgages difficult to calculate. A fixed-rate mortgage with a low fee and slightly higher APR may work out cheaper than a high fee/low APR competitor.

That means you should calculate the basic interest for a specific period and add the fees to get the real cost of borrowing.

Spring housing sales drop

The increase in house buying usually associated with Spring has also failed to materialise this year.

The Royal Institute of Chartered Surveyors reported a drop in sales in the three months from March with marked declines in Wales and the West Midlands. The only meaningful rise was in the London market, where house sales are strengthening.

Ian Perry, an RICS spokesman said, “Uncertainty over the economic outlook remains as important as the availability of mortgage finance in depressing demand.” He added that demand for rented accommodation was rising as house sales fell.

Moneyhighstreet says: “Don’t get taken in by the headline rates. A mortgage is a major undertaking, so take the time to add up all the costs involved.

“Along with the deposit, application fees are due upfront, putting a further squeeze on your personal finances. With some application fees reaching almost £2,000 or more, factor them into your budget before applying.

“One of the best ways to find good deals on mortgages is to take a look at independent price comparison sites like Moneysupermarket.com. They can help break down the costs involved and offer advice about the current market.”