Mortgage fees almost double in a year

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by Kay Murchie

A report by mortgage advice firm, Mform, has revealed that the average cost to take out a mortgage is now £5,000 - nearly double in just one year.

The company produced a report into the cost of arrangement fees and established that the average charge for the most competitive three-year fixed-rate deal last March was £578. It now costs £1,132 - an increase of 96%.

Mform compared the five best two-year and three-year fixed rate deals in March last year and compared them with the fees for the current top five.

Francis Ghiloni of Mform warned against taking the lowest interest rate without checking the fee. After all the panic of recent weeks in the mortgage market, people may be tempted to grab the best deal they can and focus on rates to the exclusion of everything else, said Mr Ghiloni.

They could be in for a nasty shock when it comes to the fee which is charged as they have rocketed in the past year, he added.

HSBC is charging around £5,000 for its ‘Rate Matcher’ deal which matches peoples’ expiring fixed-rate deals for a further 2 years.

According to the Bank of England, the interest rate on a typical two-year fix has increased from 6.47% in November to 6.64% currently.

The mortgage misery continues as there are now only 4,100 different mortgage deals on the market, compared with 15,599 last July.

Earlier this week, Scarborough Building Society axed the 50 mortgage products it sells through brokers. It blamed the unprecedented volatility in the market for the decision to withdraw the deals until next week.

Brigid O’Leary, from Capital Economics, said in light of recent data and events, there is little reason to be optimistic about the housing market. Tighter lending criteria and an uncertain economic outlook will continue to weigh heavily on buyer confidence.

Henry Pryor, founder of the property website Primemove.com, said average prices are falling about £1,000 a week and said the market was in a far worse state than had been suggested by even the bleakest reports published over the last 2 weeks.