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Figures compiled by financial information provider Moneyfacts, show that sneaky high-street mortgage lenders have been pumping up their charges to compensate for the lower, and less profitable interest rates. Mortgage arrangement fees went up by £609 in 2011; up from £889 to £1,498. That's an eye-watering increase of 69%.
In the past, lenders would charge an arrangement fee to cover the costs they incurred administering the loan. But in recent times, lenders rely on fees to bring in extra revenue. Research by consumer group Which? found that the average cost in November 2005 was £411 & more than £1000 less than todays figure.
Last year mortgage rates fell, with the average five-year fixed loan dropping from 5.24% to 4.57%, prompting lenders to hike their fees to compensate. Historically low interest rates have enabled lenders to offer some of the best deals ever, with mortgage rates being driven down even further by expectations of a base rate rise being quashed by the Bank of England.
Increasing fees is a way for banks and building societies to boost revenues, particularly if they are cutting rates on new deals, said Sylvia Waycott, of Moneyfacts. Researching the best mortgage should not just include the headline rate, but also set-up charges as these can significantly increase the overall cost of your loan.
According to Barclays Capital, mortgage payments in England and Wales averaged £494 per months, or 15.4% of home owners take home pay in 2011. This is the most affordable level for decades, but lenders still have their targets to hit, hence the sneaky hike in charges.
The Exponential Rise of Arrangement Fees |
|
Date |
Average Fee |
01/08/2011 |
£1,201 |
01/09/2011 |
£1,023 |
01/10/2011 |
£1,154 |
01/11/2011 |
£1,482 |
01/12/2011 |
£1,471 |
01/01/2012 |
£1,498 |
 Sources: thisismoney.co.uk, moneyfacts.co.uk (image courtesy of moneysavingexpert.com)
