Although contractor mortgage interest rates are going down, the same cannot be said for application fees.
Mortgage application fees have increased by over 30% in the last 12 months. Last September someone applying for a two-year fixed rate home loan would pay a total of £973 in booking and application fees. That has now increased to £1,253. The average borrower now pays £939 for the application fee, compared to last September’s charge of £699.
Especially for people with smaller mortgages, these high initial fees can offset any savings made from low interest rates.
Leeds Building Society recently launched a two year fix at 1.99%, but in order to obtain the mortgage borrowers have to pay fees of £1,999 and an exit fee of £199. Anyone applying for less than £164,000 through this deal would actually be better off getting a higher interest rate loan with lower fees. The Yorkshire Building Society charges a higher interest rate of 2.69%, but with fees of just £95, somebody borrowing £150,000 would pay £600 less with them than through the Leeds over the two year term.
Clare Francis from Moneysupermarket explained that people often don’t see further than the headline rate but there a multitude of additional fees that can boost the cost of the mortgage up dramatically.
Exit fees are now higher than they used to and upfront non-refundable fees are also more prevalent. However, David Hollingworth from London & Country mortgage brokers says that mortgage lenders are now becoming more competitive and borrowers have more choice.
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