Within the past year, fees associated with mortgages have risen by greater than 30% which is not such a great deal even in terms of low interest mortgages. In this same month last year, the average booking and application fees were £973 on a fixed rate mortgage, 2 year term. This year those same fees have jumped to more than £1,253.
Of all fees, application fees have jumped the highest with the average borrower now paying £240 more than they did just a year ago in September. At that time application fees were approximately £699 and now are averaging £939. In the period of just one year, that is an almost historic increase.
With these higher fees, borrowers seeking the best mortgage deals might think they are getting a good deal but any benefit from a low interest 2 year fixed rate mortgage is totally offset by these high fees. For example, the Leeds Building Society has initiated what they are calling the lowest ever fixed rate mortgage (2 yr) but the terms are not as good as one would think.
The interest rate looks great at 1.99% but after fees that total more than £2k just to apply for the loan, those interest rates are none too appealing. Since the fees would total such a huge amount, financial advisers are stating that the homeowner would be far better off with a mortgage at much higher interest rates and lower application fees.
As an example of the difference, Yorkshire Building Society has a loan with an interest rate of 2.69% but the total fees involved are only £95. So then, the borrower looking for a £150,000 loan for 2 years would end up paying £600 less over those two years than the loan offered by Leeds.
The bottom line is that lower interest rates should not be the prime consideration but should be carefully weighed against application and booking fees. Higher interest rates may offer a better deal when all is said and done.
