Warning as rates fall but arrangement fees soar

While mortgage rates have fallen in recent weeks, Moneyfacts.co.uk says borrowers should be wary of the rising costs of arrangement fees.

Figures show the average two-year fixed rate cost peaked at 7.08% on 11 July, and has fallen back to 6.9% today.

However, Darren Cook, mortgage expert at Moneyfacts.co.uk, says arrangement fees are on the up, and could erode the savings made on headline rates.

Moneyfacts.co.uk research indicates the average mortgage fee has increased by £100, equivalent to around 0.06% on a £150,000 repayment mortgage over two years.

“Research conducted by Moneyfacts.co.uk has shown that some lenders have increased rates and fees and not brought either back down,” says Cook.

“Other lenders have reduced rates but increased fees; some lenders have switched from charging a fixed monetary fee to offering a percentage fee.”

However, Cook believes falling swap rates, now at their lowest level since mid-April, might result in further rate cuts in the coming months.

He says borrowers should ensure they look beyond the headline rates and evaluate the total cost of the loan.

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John Bakie
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