Remortgages Are Going Up, But So Are The Fees, A Whopping 15% In The Last 18 Months Alone by Timothy Frodsham

Remortgages are on the increase due to spiralling inflation increases, but there is a little monster lurking. It has recently been in the press that remortgage deal fees have increased over the eighteen months by 15%.

Mortgage Strategy recently published the findings of research by a leading comparison website. The data showed that between September 2009 and March 2011 the average application fee for a mortgage or remortgage deal increased by just under 100.

The data showed that fees on tracker rate mortgage deals have increased by 15 per cent over the last year and a half, equivalent to 118. Fixed rate fees rose by almost as much, with arrangement fees increasing by 14 per cent (or an average of 97) over the same period. Lenders trying to maintain profit margins whilst offering attractive rates to lure borrowers was the main reason for the increases, reports Mortgage Strategy.

Of course, this news is important to the many people who are now looking to remortgage in light of the news that the Bank of England base rate is due to increase later this year. Those applying for remortgages are likely to be hit harder by these new increased fees.

For example, if you wanted to borrow 150,000 on an ‘interest only’ basis, you would be better off taking a two year fixed rate at 5 per cent with no arrangement fee than you would taking the same deal at 4.75 per cent with a 999 application fee. The lower rate might save you 500 over the two years in interest payments but you’d end up out of pocket thanks to the 999 fee.

You should also look out for any additional fees which may eat into any savings you make by remortgaging. You may have to pay some conveyancing or valuation fees as part of the process, both of which could mean that you end up saving much less in total than you previously thought.

The Daily Mail and other financial experts have urged borrowers to establish the total costs of a remortgage before applying. For example, you should work out the total repayments on a five year fixed rate mortgage and add the associated fees or charges to establish the true cost. This makes it easier to compare a number of remortgage products.

In order to attract borrowers in a competitive market, lenders have to keep their products at the top of the ‘best buy’ tables. And, in keeping interest rates low to attract business, many banks and building societies have been forced to raise the associated fees in order to retain their profit margin. That accounts for fees rising by almost 100 in just eighteen months.

Statistics published in the Daily Mail found that arrangement and application fees for mortgage deals now average around 850. They also found that the average booking fee – a charge that is ordinarily paid up front when you submit your mortgage application to a bank or building society – is now around 300.

So, the key advice if you are planning a remortgage deal is to ensure you know about all the charges and have taken them into account. It is easy to be swayed by a great looking interest rate but beware the small print. Sometimes it can actually benefit you to pay a higher interest rate and negate excessive arrangement fees and charges.

Timothy Frodsham writes for JustRemortgages.com one of the UK’s top sites for the latest remortgage rates and best remortgage deals.

Article Source: http://www.earticlesonline.com/Article/Remortgages-Are-Going-Up–But-So-Are-The-Fees–A-Whopping-15–In-The-Last-18-Months-Alone/1112944