fbpx

Average fixed rate application fees up 17pc

Nia Williams

February 13, 2013

The analysis also found a marked increase in the number of available fixed-rate mortgages.

Since June 2012 the number of 2-year fixed products has risen by 138% while the average rate has fallen 0.89 percentage points to a low of 3.56%.

The number of available 5-year fixed-rate mortgages increased 51% and the average rate dropped 0.70 percentage points.

However the application fees on 2-year fixed rate mortgages have increased by 30% in the same period, to an average of £1,033, while 5-year fees increased by 22% to an average of £883.

As a result, anyone looking for a mortgage needs to make sure they do not overlook the impact of the fee and work out the total cost of borrowing rather than focusing on the headline rate alone. Products with the lowest headline rates are not necessarily the best value over the term of the deal: once fees are factored in a product with a slightly higher rate but lower set-up costs may actually prove cheaper.

Clare Francis, mortgage expert at MoneySupermarket, said: “It’s a great time for mortgage borrowers.

“Since the Bank of England’s Funding for Lending Scheme launched last August, we have seen a significant increase in the number of new mortgage products on offer.

“In addition, 2 and 5-year fixed rate deals are currently at an all-time low.”

However Francis warned that buyers must look at set-up costs as some of lowest rates have very high fees.

“It’s very easy to be attracted by low headline rates when looking at mortgages but you must also factor in the fees you’ll be charged to take the mortgage out.

“Set-up costs can vary greatly between providers so taking the time to work out the total amount you have to repay over the term of the offer is essential.

“When comparing mortgages you should always look at the total amount you would repay, including fees, over the term of the deal.

“This is the only way to identify which product will be the best value.”


Sign up to our daily email