Fixed-rate remortgagers should factor in arrangement fees

Interest rate rises and the credit squeeze have left some mortgage borrowers anxious to secure an attractive fixed-rate product.

However, they are in danger of paying over the odds for their loans if they do not take into account the large arrangement fees attached to some fixed-rate products.

Mortgage experts estimate that around 200,000 homeowners will be coming to the end of their fixed-rate mortgages before the turn of the year.

This group will be facing the consequences of the five base rate rises since August 2006, which could increase the cost of their borrowing by over 25%.

It is therefore essential that they make comparisons between mortgage products carefully, factoring in arrangement fees, rather than signing up because a fixed interest rate looks attractive.

Those seeking to remortgage will also find that lenders have cut back their range of products and tightened lending criteria.

Anyone with a poor credit history will find that around 54% of so-called “sub-prime” residential mortgages have been withdrawn.

In addition, loan-to-value rates (that is the maximum a lender is prepared to offer) have fallen significantly across this sector.

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