The number of mortage lenders imposing a percentage fee on their fixed rate products has increased from 43 per cent to 49 per cent, according to new research from MoneyExpert.com.
The research found that for people with large home loans, fees may run into thousands of pounds, particularly as only 4 per cent of products that charge a percentage fee impose a cap of the maximum fee.
The research revealed that percentage fees vary from as much as 2.5 per cent of the mortgage loan to as little as 0.4 per cent. The average percentage fee comes in at 0.89 per cent and on a typical home loan of £150,000 this equates to a fee of £1,335.
“Fees are often linked to loan to value ratios and anyone without a significant amount of equity in their house can expect to pay a hefty fee,” said Pierre Williams, head of research at MoneyExpert.com.
“Borrowers looking for a mortgage focus on rate, but fee has to be a consideration particularly when these can run into thousands of pounds. All too often we forget about the fee by rolling it straight into the loan.”
The research further revealed that, though the number of fixed rate mortgages charging a set fee has decreased as percentage of the market from 57 per cent to 51 per cent. The highest charge on the market has increased significantly, from £1,999 last year to 2,499 today.
The total number of products charging a set fee has increased from 405 to 472 as the market has expanded. The increase consists largely of the introduction of new tiers of fees by the banks. Last year for example there was only one mortgage charging a fee of between £100 and £200 but today this figure has increased to 49. Similarly, a year ago there were 17 products charging between £700 and £800 but today there are 61 products.
Average fees have actually decreased slightly from £860 a year ago to £790, largely due to the introduction of a large number of mortgages charging a small set fee rather than a percentage fee.
Mainstream lenders currently offering fixed rate mortgages with a fee of less than £300 currently include Royal Bank of Scotland and NatWest, on products to existing customers, while regional building societies such as Skipton also offer competitive deals.
“Borrowers need to make a calculation as to whether they opt for a fixed or percentage fee but with the introduction of large numbers of low fee mortgages this year borrowers do have options when it comes to choosing a mortgage,” added Williams.
