Mark Chilton, Chief Executive of Purely Mortgages comments on Charcol’s research into rising mortgage arrangement and exit fees. “Whilst there is no getting away from rising arrangement costs, lenders are providing more choice between up front costs and a low headline rate or a higher rate but lower fees. Which best suits an individual’s needs will depend on a number of factors; larger up front fees and lower rate will, as a rule, be cheaper for borrowers in the long run, however some people, especially first time buyers, those on a tight budget or those with smaller mortgages may prefer a slightly higher rate if it reduces the fixed costs they have to pay up front.
Research conducted on behalf of Purely Mortgages by YouGov found that almost two million (7 per cent of homebuyers) found fees the biggest barrier to purchasing a home. Chilton concludes, “With news of rising fees, people need to look at ways to mitigate rising costs and one fee an average borrower can and should avoid is a broker fee. Choosea fees-free broker and you will get a professional advisory and arrangement service, without having to pay 1.5% of the loan to a broker, on top of the other mortgage fees.”
3 high fees low rate products (no overhanging early repayment charges; tables compare rates and arrangement fees, valuation fees and legal fees only):
RATE
FEES
COST OF £100,000 INTEREST ONLY MORTGAGE OVER 2 YEARS
Abbey 0.31% under Base Rate Tracker 4.44% variable for 2 years (only available to 60% LTV).
£499 arrangement fee, valuation costs and legal costs
(£370 x 24) + £499 + £350 + £400
= £10129.00
Portman Building Society 2.26% Discount from SVR 4.48% variable for 2 years (available to 95% LTV)
£399 arrangement fee, valuation costs and legal costs
(£373.33 x 24) + £399 + £350 + £400
= £10108.92
Portman Building Society Fixed Rate- 4.64% fixed for 2 years (available to 95% LTV)
- £399 arrangement fee, valuation costs and legal costs
(£386.67 x 24) + £399 + £350 + £400
= £10429.08
3 high rate/ low fees products(no overhanging early repayment charges; tables compare rates and arrangement fees, valuation fees and legal fees only):
RATE
FEES
Cost of £100,000 interest only mortgage over 2 years
Intelligent Finance Base Rate Tracker - 4.75% variablefor 2 years (available to 95% LTV)
£349 arrangement fee butvaluation refunded and free legals
(£395.83 x 24) + £349 = £9848.92
Clydesdale Bank Fixed Rate - 4.90% fixed for 2 years (available to 95% LTV)
£449 arrangement fee but free valuation and free legals
(£408.33 x 24) + £449 = £10248.92
Abbey 0.54% over Base Rate Tracker 5.29% variable for 2 years (available to 95% LTV)
no arrangement fee, free valuation and free legals -
(£440.83 x 24) = £10579.92
