There is always intense scrutiny in the media about the business of mortgages. This month there was an interesting report about how mortgage fees are unjustifiably “soaring” while the interest rate continues to stay low.
According to the latest research, fixed rate mortgages are at their highest since August 2013. Also, the fees associated with such deals now exceed £1,000. Some products are accompanied by fees in excess of £2,000 fee. While there is even a fixed rate mortgage with a fee structure of just under £4,000.
These are big figures, but while we haven’t noticed that fees are going up massively. However, it stands to reason that while interest rates remain low lenders will look to the fees as a way of making money back on their products.
However, although lenders will generally give with one hand and take with another, the reality is that the fee structures can vary widely from one lender to another. Some lenders won’t charge fees at all on some products. Also, the prospect of having to pay fees should not put anyone off. Whether it be getting a mortgage or getting themselves a new deal.
Instead, just like the interest rates, they should be considered as part of a whole package and not something to stress over. This is because the mortgage-buying decision is driven by an individual’s circumstances. This includes their budget, how much equity they have in their current home and their plans for the future. At this initial stage, fees don’t come into it.
It is important to stress that, by law, lenders have to outline all of their product-related costs in the mortgage illustration document. There will be no hidden extras and it is incumbent on them to include any fees as part of their annual interest calculation. This way buyers know exactly how much they are going to have to pay each month. Even if they choose to add them to the mortgage rather than pay them at the outset.
This is when fees become important and can impact on the choice of mortgage. If you are borrowing a larger amount of money then a large fee may be worth it. Especially if it means getting a lower interest rate. While opting for a higher rate but with lower fees or no fees could actually work out cheaper in the long-run.
The devil is in the detail, which is why focusing on fees in isolation is something of a red herring. This is especially since there has never been a better time to get a mortgage! Lenders are falling over themselves to come up with better and better deals.
If you think we can help, give us a ring on Freephone 0800 103 2655 or 01332 821 340.