Overlooking mortgage fees a “costly mistake”

July 11, 2017 by Brendan

Mortgage Advisors

Experts warn that ignoring mortgage fees when remortgaging could be a “costly mistake”, and that it may be cheaper to pay a higher interest rate with lower, or no fees added.

According to Moneyfacts, fees are now at their highest in the last four years, with the average standing at over £1,000. A report by the financial information service states that lenders and borrowers tend to overlook mortgage fees, and concentrate on interest rates. However, it may be cheaper to opt for a deal with a slightly higher rate of interest, with either a low fee or no fees at all.

Charlotte Nelson, of Moneyfacts, said that as fees are increasing, it is crucial to consider the real cost of a mortgage deal, especially if the borrower tends to choose short-term fixed rate deals.

Mortgage advisors are best placed to help buyers calculate the true cost of a deal, as they have studied on a CeMAP course, which provides the information. When the fee added to a product is relatively large, lenders often offer an option to add it to the mortgage, which adds to the overall cost and increases the monthly repayment. Swapping deals often, with a large mortgage fee each time, can add thousands onto the mortgage cost over the term.

Moneyfacts found that some fees for deals with extremely low interest rates are as high as £2,000. In one case, the fee was £4,000. One year ago, the average fee was £986, while the average fee this year is £1,018. Fees in July 2014 were averaging at £886.