Despite the average rate on non-conforming mortgages rising marginally from 6.33 per cent in July 2006 to 6.57 per cent in January 2007, the report warned of massive fee hikes on these types of mortgages.
On average, fees increased by 13.5 per cent during the same six-month period, rising from £813 to £923, while the number of non-conforming mortgages with a fee of over £1,000 rocketed by over 46 per cent.
Fees-free non-conforming mortgages are also becoming thin on the ground the research reported, with the number of lenders willing to offer mortgages without a fee dropping 81 per cent from 71 in August 2006, to 13.
Further analysis of the non-conforming market showed that of the 2,500 different types of mortgages available, around 1,690 charged applicants 6 per cent or higher to borrow money.
Sean Gardner, chief executive at MoneyExpert.com, said: “Many people rely on non-conforming mortgages, from the self-employed to people who have poor credit ratings. Although it’s good news that many lenders haven’t passed on the Base Rate rises to non-conforming mortgages, customers have to be wary of fees.”
Mark Gordon, head of product development at Platform, said: “In an environment of rising rates and costs of funds, lenders are increasingly using arrangement fees to control rates. As this analysis rightly points out, some lenders are setting upfront fees at a higher level in order to lower the headline rate.
“It essentially comes down to consumer choice and personal circumstance. For those people with larger loan sizes, a high fee option would work out cheaper. It is up to the consumer and the intermediary they use to find the right option that best suits their individual needs.”
