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Mortgage Fees – Double or Quits? - [BACK] Mortgage lenders have doubled their upfront fees in the past two years, according to financial information service Moneyfacts. Figures from November 2005 found that a flat mortgage arrangement fee at £441 but this has increased to £827 at the end of 2007. The accounting firm PwC gave off a stern warning in its recent Precious Plastic report by indicating that thousands of mortgage borrowers are set to come off their fixed rate mortgages in 2008. The problem is that many borrowers will be hit by even the best deals being over 1% more than when they took their mortgages out in 2005. To compound matters, those who do make the switch to a lower rate will also have to pay over the odds for arrangement fees that have risen by 100% over the last two years. While mortgage fees have grown rapidly, it doesn’t necessarily mean that the cost of mortgages as a whole has increased. Instead, borrowers are now presented by a muddle of perks and incentives offered by lenders that can prevent them from getting the best deal. Many mortgage borrowers focus too much attention on getting the best rates, rather than seeing the set up fees or the early repayment charge. Providers can exploit this by offering low rate but high fee mortgages. Earlier this year the Halifax was accused by two liberal Democrat MPs of trying to deceive customers into taking a deal with a low initial interest rate of just 1.99% in the first year – the same deal also included an upfront fee of £1,999. While some mortgage lenders also charged for an exit fee, which is the practise of lenders imposing bigger fees for closing a mortgage when the loan was paid off, the Financial Services Authority has agreed that many of these were unfair, as the higher charges had not been agreed by the lender when they first took out the loan. To counter this loss of income, lenders have chosen to charge higher arrangement fees. There are currently 6000 different mortgages now available in the market, and with lenders making it increasingly confusing getting the right deal may not be easy. However, it is essential that potential borrowers do the necessary research, and it’s probably a good idea to talk to an independent mortgage adviser before committing to any deal. [BACK] |