Homeowners warned over extra fees when remortgaging


Homeowners who turn a blind eye to extra fees when remortgaging are making a “costly mistake”, according to a financial information service.




Moneyfacts says that many borrowers and lenders are more interested in mortgage interest rates rather than the additional fees involved, and in doing so are risking higher costs than expected.

The average fee charged now for a fixed-rate mortgage is £1,018, a four-year high. In August 2013, the average fixed mortgage fee was £1,005. It then dropped to £886 the following July, and has since been rising each year up to this latest high.

Currently, the UK mortgage market contains some of the lowest rates ever seen, but Moneyfacts wants to bring attention to the fact that in some instances, borrowers may be better off selecting higher rates with smaller, or no, fees.

Charlotte Nelson of Moneyfacts said: “Those savvy borrowers heeding the advice to remortgage could find that moving deals can be a costly affair, especially if their preference is for shorter-term fixed rates. Therefore, with fees on the rise, it is more important than ever for borrowers to consider the true cost of a mortgage before obtaining a deal.

“Deals with larger fees often allow you to add the fee to the mortgage advance. However, this increases the amount borrowed, pushing up monthly repayments. The extra saved by opting for a deal with no fee could be better used to overpay the mortgage, which could help borrowers become mortgage-free quicker.”

Mark Harris of SPF Private Clients said: “Borrowers must remember that there is more to a mortgage than the rate of interest. The total cost (rate plus all fees) must be calculated so that you can compare mortgages on a like-for-like basis. If you can’t do the sums yourself, ask an independent whole-of-market mortgage broker for help.

“Generally speaking, lenders offering rock-bottom rates may charge a higher fee in order to make the pricing commercially viable. However, that doesn’t mean you should always avoid high fees because you may get a very cheap rate.

“Whether it is worth paying the high fee in order to get the cheap rate or not will depend on the size of your mortgage. The bigger the mortgage, the less important the fee and the more important the rate.”

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