Banks and building societies have raised their application fees on fixed rate mortgage deals as homeowners surge towards fixed deals in the wake of three base rate increases in six months, according to MoneyExpert.com.
New analysis* by the independent financial comparison website shows that the average application fee has increased by 18.5 per cent since the first Bank of England rate rise in August 2006. And during the same period the number of products that come with a fee of over £750 has risen sevenfold from 13 to 93. The number of fixed mortgages with fees of under £500 has slipped by 28 per cent from 349 to 251.
MoneyExpert.com says that banks and building societies are looking to capitalise on the appetite for fixed rate deals as homeowners look to avoid increased monthly repayments caused by interest rate rises.
Sean Gardner, Chief Executive of MoneyExpert.com, said: ìHomeowners are desperate to fix their mortgage rates to avoid incurring further costs caused by rising interest rates. Itís the sensible option as further rises arenít out of the question.
ìHowever, banks arenít stupid and fees should be taken into consideration if youíre looking to switch. You could incur exit and application fees just for moving provider so check before you commit. These can be hefty and may mean the difference between staying put and moving on.”
The MoneyExpert.com analysis shows that hundreds of fixed mortgage products do not prescribe a set application fee, with providers choosing instead to vary fees or in some cases not to charge a fee at all. The independent website says that in some instances homeowners will be charged a percentage of the total value of their loan. For example, a typical loan of £100,000 with a charge of 2 per cent would add a further £2,000 to the total cost of the mortgage.
Sean Gardner added: ìNot every mortgage comes with an upfront application fee, so itís not all bad. But choosing a mortgage is a complex business and for many people it wonít be appropriate to choose a product based on whether or not it charges a fee. The best advice is to weigh up your options and choose a product that best suits all your needs, fee or no fee.”
Providers that do not charge application fees on some of their fixed rate mortgages include: Abbey, Cheltenham & Gloucester and Northern Rock.
The news of fee hikes on fixed-rate deals comes after MoneyExpert.com research showed that fees payable on so-called ësub primeí mortgages have also risen dramatically since the base rate increases. The average fee on sub prime mortgages has increased by 13.5 per cent from £813 to £923 and the number of sub-prime mortgages with a fee of over £1,000 has rocketed by over 46 per cent during the same period.
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Notes * MoneyExpert.com analysis of the Defaqto Aequos Database, 13.07.06 & 06.02.07