Cheap mortgage deals may be too good to be true
There is concern borrowers may be misled by cheap mortgage headlines, as lenders offset these attractive rates with hefty arrangement fees.
According to research conducted by independent price comparison site, Moneyfacts, the average mortgage arrangement fee has increased by 17 per cent year-on-year. In August 2010, a borrower could expect to pay an arrangement fee, on average, of £879; August 2011, homeowners will have to stump up an average of £1,030.
The highest fee is currently a staggering £3800 for a 5-year fix at 3.64 per cent up to 75 per cent loan-to-value, for loans between £750,000 and £1.5m.
The research also discovered arrangement fees increased 3 per cent month-on-month, between July and August. A spokeswoman for Moneyfacts said:
“Lenders appear to be offsetting the low mortgage rates on offer by increasing the arrangement fees as they battle to offer the lowest headline rate.”¹
¹Mortgage Strategy (Aug 2011)
Content correct at time of publication