The coming months are traditionally a quiet time for the housing market, and this year will doubtless be no exception as mortgage lenders have let their application fees skyrocket over the last few months.
MoneyExpert research has revealed a massive jump in the number of lenders with uncapped fees, the figure rising from 110 mortgage products this time last year to 506.
That means instead of paying a set fee of, say £500 for completing a mortgage deal with a firm, you’ll now pay a percentage of the amount you borrow. If you borrow lots, you pay lots.
Such news is unlikely to bolster the faltering housing market, which has been reported this week as suffering its worst fall in 12 years.
It’s a fair bet that WAGS like Coleen McLoughlin or Alex Curran won’t let such costs bother them in their search for a dream home, but for anyone else a jump in mortgage fees could be a serious obstacle to getting on – or moving up – the property ladder.
Cost of a fee
When looking to buy a house it can be tricky to keep your eye on the various fees attached when the overall price of the property seems to be the key factor. But with mortgage companies now free to charge fees as a percentage of the total loan those fees could be huge, and certainly worth considering.
On the current average mortgage of £152,300 a three percent fee would be a hefty £4,569. But on a £343,000 mortgage – the average cost of a detached house in the UK – the same charge would require the applicant to fork out £10,290.
Check the small print
Fees are easily hidden away so it’s hugely important to work out all the sums to find the eventual cost of the deal. Mortgage lenders should be clear about their new fee structures, but many homebuyers are still unaware of the shift to uncapped charges.
What to do?
Unfortunately, with the bulk of the market moving in a certain direction there’s little you can do to avoid some heavy fees, but it’s always worth looking around for the best deal, and then taking the whole package into consideration.
There are over 2,300 different fixed and variable rate mortgage deals on the market catering for everyone from graduates to sub-prime borrowers and self-employed people so the chances are there will be a mortgage suitable for you somewhere, whether carrying a sizeable fee or not.
The key is to know the ultimate cost and how much you can afford. Once you’ve established your budget it may be worth enquiring as to whether the fees can be tagged onto the overall loan as this may help you to manage the overall cost. Click here to get a mortgage quote.