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- The Last 18 Months Have Seen a 15% Rise in Remortgage Fees - Here's Why This Can't Continue...
The Last 18 Months Have Seen a 15% Rise in Remortgage Fees - Here's Why This Can't Continue...
- By Howard Ogollegos
- Published 09/18/2011
- Real Estate
- Unrated
A recent report has discovered that the application fees associated with mortgage and remortgage products have risen considerably over the last year and a half. So, if you are considering a remortgage, it is more important than ever that you fully understand the costs incurred as part of the process and that you take these fees into account when switching lender.
Between September 2009 and March 2011 the average application fee charged on mortgage and remortgage products in the UK increased by just under GBP 100. That's the findings of recent research from a leading price comparison website and featured in the specialist finance publication Mortgage Strategy.
The fees appear to be increasing on various types of mortgages, including fixed and tracker rate products, with tracker rate products seeing the highest increase of 15%, compared with 14% on fixed and other mortgage product types. Tracker rate mortgages have always been traditionally lower in product fees, but they are now swiftly catching up with the fees set on other products.
There are times when it can actually be better to pay a higher interest rate on your mortgage and a lower arrangement fee. This is why it is crucially important that you compare both the headline interest rate and the associated fees and charges before signing up to any remortgage deal.
Let's look at this example; on a GBP 150,000 'interest only' mortgage, you are more likely to benefit if you take out a two year fixed rate deal at 5 per cent without fees than if you took out a 4.75 per cent fixed rate mortgage with
a GBP 999 fee. Throughout the life of the deal the lower interest rate would save you GBP 750 over the two years but the GBP 999 application fee negates these savings.
You should also look out for any additional fees which may eat into any savings you make by remortgaging. You may have to pay some conveyancing or valuation fees as part of the process, both of which could mean that you end up saving much less in total than you previously thought.
When comparing mortgages, it is advisable not to look at the total cost of the mortgage over the entire term, but to compare using the total cost over the term of your introductory rate or fixed period. This is because that is a more realistic approach, as you are likely to remortgage again once your fixed discounted period is over.
In order to attract borrowers in a competitive market, lenders have to keep their products at the top of the 'best buy' tables. And, in keeping interest rates low to attract business, many banks and building societies have been forced to raise the associated fees in order to retain their profit margin. That accounts for fees rising by almost GBP 100 in just eighteen months.
According to a national newspaper, the average arrangement fee on a mortgage is still under GBP 1,000; however this figure is slowly creeping up and could cause many people to rethink remortgaging their homes.
Experts agree that it is important to take both the interest rate and the fees into account when choosing a remortgage deal. As we saw earlier, sometimes picking a higher interest rate with a lower fee can actually leave you better off, so make sure you do your homework carefully before picking making a final decision.
Between September 2009 and March 2011 the average application fee charged on mortgage and remortgage products in the UK increased by just under GBP 100. That's the findings of recent research from a leading price comparison website and featured in the specialist finance publication Mortgage Strategy.
The fees appear to be increasing on various types of mortgages, including fixed and tracker rate products, with tracker rate products seeing the highest increase of 15%, compared with 14% on fixed and other mortgage product types. Tracker rate mortgages have always been traditionally lower in product fees, but they are now swiftly catching up with the fees set on other products.
There are times when it can actually be better to pay a higher interest rate on your mortgage and a lower arrangement fee. This is why it is crucially important that you compare both the headline interest rate and the associated fees and charges before signing up to any remortgage deal.
Let's look at this example; on a GBP 150,000 'interest only' mortgage, you are more likely to benefit if you take out a two year fixed rate deal at 5 per cent without fees than if you took out a 4.75 per cent fixed rate mortgage with
You should also look out for any additional fees which may eat into any savings you make by remortgaging. You may have to pay some conveyancing or valuation fees as part of the process, both of which could mean that you end up saving much less in total than you previously thought.
When comparing mortgages, it is advisable not to look at the total cost of the mortgage over the entire term, but to compare using the total cost over the term of your introductory rate or fixed period. This is because that is a more realistic approach, as you are likely to remortgage again once your fixed discounted period is over.
In order to attract borrowers in a competitive market, lenders have to keep their products at the top of the 'best buy' tables. And, in keeping interest rates low to attract business, many banks and building societies have been forced to raise the associated fees in order to retain their profit margin. That accounts for fees rising by almost GBP 100 in just eighteen months.
According to a national newspaper, the average arrangement fee on a mortgage is still under GBP 1,000; however this figure is slowly creeping up and could cause many people to rethink remortgaging their homes.
Experts agree that it is important to take both the interest rate and the fees into account when choosing a remortgage deal. As we saw earlier, sometimes picking a higher interest rate with a lower fee can actually leave you better off, so make sure you do your homework carefully before picking making a final decision.
Howard Ogollegos
Howard O'Gollegos writes for JustCommercialMortgages.com the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.
View all articles by Howard Ogollegos