Mortgage lenders shift to uncapped arrangement fees

MoneyExpert.com is alerting borrowers to the fact that the number of mortgages with uncapped upfront fees has increased dramatically over the past 12 months.

The price comparison website points out that in November of 2006 only 110 mortgage products included uncapped application fees, that is fees calculated on the amount borrowed.

Today the figure stands at 506 and MoneyExpert.com is warning homeowners and first time buyers that the rise is likely to continue for as long as the housing market remains uncertain.

Many lenders are changing between 1% and 2% of a total loan, although fees of over 3% have been applied.

A fee of 3% on the current average mortgage of £152,300 amounts to £4,569, but for larger loans, say a £343,000 mortgage (the average cost of a detached house in the UK) the charge would be £10,290.

Sean Gardner, Chief Executive of MoneyExpert.com, advises borrowers “to look carefully at mortgage deals and not just focus on the interest rate … what might look like a good deal will soon become a bad deal once fees are taken into account.”

MoneyExpert.com estimates that there are over 2,300 different fixed and variable mortgage products on the market and while “mortgage application fees are nothing new … lenders often won’t publicise a change to their fee structures, meaning some homeowners could be unaware of this huge shift to uncapped charges”.

Other recent data from MoneyExpert shows that the number of mortgage application rejections had risen by around 60% since March of this year.

Banks and building societies have been tightening their lending criteria and over 738,000 potential borrowers had their mortgage applications rejected in the six months to October.

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