Sharp rise in mortgage fees
August 15, 2008
According to a recent report there has been a sharp rise in the cost of mortgage related fees over the past year, making affordability for potential buyers even more difficult. The rocketing fees are likely to further impact on the slowing housing market, with even fewer buyers able to get onto the property ladder. Over the past year mortgage fees have gone up by around 20%, and many consumers will find that they have to shell out thousands of pounds simply to get a mortgage, and then may high interest rates and put down a large deposit on top of these fees.
In August of last year the average mortgage arrangement fee came to around £740. However, by July of this year the average mortgage arrangement fee has risen to around £890, which is a rise of 20%. Officials have said that increased mortgage arrangement fees are one of the ways in which lenders are trying to increase profits at a time when many lenders and banks are suffering severe financial problems due to issues with raising money on the wholesale money markets.
One industry official said: ‘With the current challenges facing the mortgage market, it is not surprising to see that fees have risen by so much. This means that it has never been more important to look at the true cost of your mortgage, taking into account the interest rate but also any fees and charges that you have to pay.’
Another official said that there was no firm indication that the situation was improving even though some lenders had reduced interest rates. She said: ‘It is too early to say that we have finally turned the corner. We need to see a more prolonged period of rate reduction, something which is starting to look unlikely.
Although the average two-year swap rate is well below its peak of 6.52% in mid-June, in the last few days swap rates have started to edge up again. If this continues we could see lenders once again passing the increased cost back onto consumers.’
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