Homeowners have been warned that the costs of finding the best mortgage rate are rising as lenders increase their fees in line with the size of the loan sought.
Administrative costs can come as a surprise to homeowners looking to compare mortgage rate deals, and may harm competitiveness, warn financial analysts.
“Lenders margins are getting ever tighter and consumers are more likely to switch lenders to obtain the best deal – these are the reasons that fees are increasing,” mortgage analyst Rachel McKay told MyFinances.
“If you think about it, with the advent of new technology and a ‘paperless office’ there should be less work involved for lenders and the cost should really be reduced accordingly.”
She added: “There are a couple of areas that consumers need to be aware of with arrangement fees.” In particular, she warned that some deals may require the non-refundable fees up front, with no guarantee of a succesful application.
Homeowners should also beware lenders’ offers to add the fee to the mortgage sum, which will only increase the amount of interest payable on the overall mortgage.
Ms Mckay identified a new trend for mortgage providers to charge higher fees for larger mortgages as her greatest concern, however.
“The size of the loan should have no bearing on the administration time involved in a mortgage application as long as the LTV [loan to value] and income multiples fit the lender’s criteria.
“With property prices at a near record levels, the trend towards fees charged as a percentage of the mortgage instead of a flat fee is both a worrying and expensive one for the consumer.”
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