Remortgages Are Going Up, But So Are The Fees, A Whopping 15% In The Last 18 Months Alone
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.
Mortgage Strategy recently published the findings of research by a leading comparison website. The data showed that between September 2009 and March 2011 the average application fee for a mortgage or remortgage deal increased by just under £100.
The study uncovered the fact that during the past eighteen months, fixed rate fees for remortgages and for mortgage deals grew by an average of 14 per cent, the equivalent of a £97 hike in charges. Fees for other tracker products grew by £118 in the same period, a surge of 15 per cent. Mortgage Strategy said the increase in fees was due to lenders keeping profit levels high whilst trying to keep headline interest rates low in order to remain competitive.
Of course, this news is important to the many people who are now looking to remortgage in light of the news that the Bank of England base rate is due to increase later this year. Those applying for remortgages are likely to be hit harder by these new increased fees.
For example, on a £100,000 ‘interest only’ mortgage you would end up paying more on a two year fixed rate at 4.75 per cent with a £999 arrangement fee than you would on a 5 per cent rate with no fee. Your mortgage payments would be £500 more over the two years, but you wouldn’t have to pay the £999 arrangement fee.
When you are remortgaging it is also very important that remember that you are liable for other fees. These include valuation and legal fees and they also include s any fees or penalties from your current lender for repaying your mortgage early. All of these fees could wind up gradually diminishing the savings you had hoped to make.
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.
Headline interest rates have been kept low over recent years as lenders fight for their share of the remortgage market. It is this fierce competition amongst banks and building societies that has resulted in the rise in application fees of almost £100 over just a year and a half.
According to a national newspaper, the average arrangement fee on a mortgage is still under £1,000; however this figure is slowly creeping up and could cause many people to rethink remortgaging their homes.
So, the key advice if you are planning a remortgage deal is to ensure you know about all the charges and have taken them into account. It is easy to be swayed by a great looking interest rate but beware the small print. Sometimes it can actually benefit you to pay a higher interest rate and negate excessive arrangement fees and charges.
Timothy Frodsham writes for JustRemortgages.com one of the UK’s top sites for the latest remortgage rates and best remortgage deals.