Lenders Increase Mortgage Fees

Lenders Increase Mortgage Fees

by Rebecca Hall on 30 Mar, 2011

In a further blow to prospective homeowners, a growing trend has emerged of mortgage lenders increasing their fees, often wildly out of proportion with the actual administrative costs associated with the mortgage loan.

Typical arrangement feeds are in the region of £1,000, but many brokers are now charging anything up to £3,000. Some, such as Skipton Building Society, are charging a separate “application fee” up-front and “completion fee” after the mortgage has been secured.

In the context of cautious lending and low interest rates the trend is hardly surprising, however it does mean that many of the cheaper rates are out of reach for those who need them most thanks to the hefty up-front fees, particularly as including the fees in the overall mortgage payments is becoming less common.

Some lenders are even charging their fees as a percentage of the total value of the mortgage, adding up to some fairly large amounts for those with larger mortgages.

The trend is a further reminder to buyers to take fees into account when choosing a mortgage, as the quoted rate may be unattainable, particularly for first-time buyers, so shopping around and making sure you get all the information available are absolutely crucial.

It’s worth remembering that a higher up-front fee could mean a significantly lower rate in the long term, saving you significant sums over the years and making the initial hit more than worthwhile. At the same time, if you can get the same rate elsewhere for lesser fees, then that is the ideal outcome.

Although the mortgage lending industry is right to be wary after their part in the financial crisis, primarily attributed to indiscriminate lending in the sub-prime market, it should be careful about making it too difficult to get on the property ladder. Combined with historically high property prices, high deposit requirements and job insecurity, increasing fees may only serve to decrease the potential customer base.

Put simply, although the increases are understandable, lenders should be careful not to shoot themselves in the foot.

About the Author

Rebecca Hall

Rebecca Hall worked as an independent mortgage adviser for 10 years before turning to financial journalism full time. She has strong links to the CAB advising families on mortgage refinancing.