Mortgage fees dip ahead of base rate rise

Mortgage fees are falling at all loan-to-value categories, just in time for customers hoping to fix before the Bank of England hikes interest rates.
Mortgage fees dip ahead of base rate rise


Mortgage fees, which come under a number of guises – arrangement fees, product fees, completion fees and so forth – have shown a fall for the first time in years.


Average fees have dropped by about £100 over the past year, according to Moneyfacts, following a series of steep rises.


The average product fee at 60% loan-to-value has fallen by 5% over the past year, from £1,671 to £1,582.


This marks the first annual fall in almost four years, when the average was at a much more palatable £875.


The average product fee at 75% LTV has fallen by 9%, to £1,420, while the average fee for first-time buyers with low deposits shows a more modest fall of 3%, to £1,181.


Mortgage fees are an important factor for mortgage hunters to consider, because the combination of a slightly higher rate with a lower fee can often prove to be much better value than a rock bottom rate with a much higher fee.


See Which4U’s guide on how to assess mortgage rates and fees.


Modern Home

Mortgage fees have shown a slight fall on 2013 figures, following several years of steep increases.


The latest stats reflect brokers' predictions that lenders would have to lower mortgage fees to remain competitive.


“In terms of how they can continue to attract more business in an environment of low rates, I think we will start to see more fee-incentive products,” said David Hollingworth of London & Country.


Lenders began pushing fees up after the low base rate and the Funding for Lending Scheme started to drive down mortgage rates.


Despite the cheaper cost of borrowing for the banks, higher fees have allowed them to claw back some of their margins.


But mortgage rates have started to edge upwards again, as lenders adjust their fixed-rate terms to reflect the anticipated rise to the Bank of England base rate over the coming years.


“There isn’t huge capacity for further rate cuts so fees could be the next battleground for lenders,” Mr Hollingworth added.


The slow climb in rates does not appear to have deterred house hunters, however, with activity sparking again following a lull in the aftermath of the Mortgage Market Review.


Keith McDonald

Which4U Editor

Thanks for reading! Follow us on Facebook and Google+ for updates. For the chance to win £500 in vouchers, enter our competition.