The mortgage industry may be throwing agents and the housing market something of a lifeline - it’s been revealed that 40 per cent of mortgages now involve no arrangement fees.
The research comes from the independent mortgage market monitor Moneyfacts which says that in July 2016 the number of fee-free mortgage products was just 1,270; that rose to 1,709 this time last year.
But now the figure is 2,007 - representing four in 10 of all mortgage products, and an increase of 274 products since the start of 2018 alone.
“It’s clear that lenders are still trying to compete but in ways beyond the headline rate. Providers have opted to keep rates relatively static, choosing to wait and see if a base rate rise will come to fruition. By reducing some of their fees to zero, providers are able to remain competitive among their rivals” says Charlotte Nelson, finance expert at Moneyfacts.
But she warns that for the 60 per cent of products which do have arrangement fees, those charges are on the rise. They were an average of £979 in March but have hit £990 this month.
“Many borrowers focus on achieving the cheapest possible deal, and while this should be admired, they may be missing out on offers that could be more cost-effective in the long run. For example, borrowers opting for the lowest two-year fixed rate deal at 75 per cent loan-to-value would be £1,131.80 worse off compared to someone opting for the lowest deal without a fee” explains Nelson, who bases her figures on a £200,000 capital and interest repayment mortgage over a 25 year term.
“Ignoring the fee-free options on the market can be a costly mistake as fees can mount up, particularly if you remortgage multiple times over the lifetime of your mortgage. While many products allow you to add the fees to the deal, borrowers would then end up paying more in the long-run” she adds.