Telegraph article on mortgage fees

ended 21. June 2021

A journalist at the Daily Telegraph is writing a story today on Moneyfacts data showing the average fee for a fixed-rate mortgage has increased by £57 over the past year, hitting £1,075 this month. There are also fewer lenders offering deals with no fee at all. 

Moneyfacts has also warned that, as lenders compete in a rate price war, they will be looking to make up costs elsewhere and buyers should be wary of "eye-catchingly low" rates without considering the overall fee cost, too. Presumably this will particularly apply to first-time buyers who have less cash upfront? 

Deadline is tight so keep your alert_responses short and sweet - 2-3 sentences max!

 

8 responses from the Newspage community

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"In many scenarios it works out more cost-effective to go with a product that has a slightly higher rate and lower fees. Despite this, I have had a surprising number of cases where my client is still drawn in by the headline rate even after I explain the maths behind why it will end up costing more. "I think lenders are aware of this buyer psychology and cleverly remodel their deals to attract custom, similarly to more well known psychological pricing, such as setting the price just under a whole number so it sounds less expensive. My advice would be speak to a broker and do the maths to work out the overall cost comparison."
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"Lenders have always used higher fees as part of the overall product in order to enable them to offer lower headline rates. The fact that fees have increased recently shows that lenders are as keen as ever to appear at the top of Best Buy charts. "Borrowers should not allow themselves just to be enticed into the honeytrap, but instead carefully review the product as a whole, fees and all, with an expert. It may well be that taking a slightly higher rate with a lower fee represents better value."
"People should be more wary about overpaying for a property in a white-hot market than whether their booking fee is £57 more than it was this time last year. Of all of the eye-wateringly high numbers involved in the cost of purchasing property, I would suggest that this is one that doesn't need too much thinking about. "Yes the cost can have an impact over the term of the loan if it is added to the mortgage amount because interest is payable on it. That said, and depending on the loan size, the benefits of a lower rate can quite often outweigh the impact of a high product fee."
"Many lenders charge higher product fees to offer cheaper headline rates but they often include a free property valuation and a contribution to the legal costs. "To access the sub-1% fixes, you normally have to pay £999 or £1,499 but this can be added to the loan. "If you are in the market for a larger mortgage then these arrangement fees are a small price to pay. HSBC's latest 0.99% fixed rate has a £999 fee and a £5 million maximum loan size."
"With mortgage rates at an all-time low and lenders competing more and more aggressively for those with larger deposits or equity in their homes, something has to give for lenders. "We are now seeing much larger arrangement fees for the headline rate products, so as always the rate should not be the be-all and end-all of a mortgage for borrowers." "The overall cost over the desired mortgage period is constantly overlooked and hence the borrower ends up spending more than they should when they rate shop."
"When selecting a product, it's very important to factor in the total cost over the fixed rate period. As well as the product fee, you should also consider the other costs such as valuation fees. These vary between lenders, with some offering a free valuation. The valuation fee is non-refundable once carried out. Therefore, if the purchase falls through at a later date, you would not get this back. This is something to factor in, especially with the property market at the moment, there is very strong demand and we have seen a return of gazumping. "As a high net worth broker that specialises in mortgages above £500,000, we generally find that the better option is to have a lower rate with an arrangement fee."
"Forget about cheap monthly payments and fixed rates: modern mortgages are about the whole cost and the overall suitability of a product for a buyer. "That's why human advice matters so much in today's market. If something seems too good to be true it probably is, and going through all your options with an adviser can reap dividends. "The fact is, sometimes it can be cheaper overall to pay an early redemption fee if it means securing a better deal for a buyer's unique circumstances. It's a bespoke rather than a blanket approach."
"Lenders 'robbing Peter to pay Paul' by matching eye-catchingly low rates with higher than average fees is nothing new. The slew of sub-1% rates with typical fees of £1,500 is yet another example we're seeing recently. Borrowers should seek the advice of a professional adviser who will weigh up the fees against the rate for the most cost-effective option overall, not just the lowest headline rate."