Arrangement Fees Have Been On The Rise
Research shows that arrangement fees have gone up by 20% in the past year, those on three-year fixed rates moving up fastest. Meanwhile two-year fixed rates have come down from a recent peak, but increasing swap rates may push rates up again.
Mortgage arrangement fees have jumped by 20% in the last 12 months. Borrowers seeking out the best deals for interest rates may then be hit with a stinging arrangement fee.
Research carried out by comparison website mform.co.uk shows that in August 2007 the average arrangement fee on a best-buy mortgage was £738, but this has now reached nearly £890.
The average best-buy three-year fixed mortgage has seen fees rise by a staggering 59%, from £591 to £938. Some good news is that the arrangement fee on best-buy two-year fixed rates has actually fallen by 3% - though it was high in the first place. It is now £1,029, down from £1,058 last August.
Banks and building societies have pushed up arrangement fees as they have tried to increase their cash reserves in difficult times.
The rise in arrangement fees makes it ever more important to understand where all the costs are for a mortgage. It is not just the interest rate that is important. The recommendation by experts is to work out the full cost of repayments over the period of the deal, and then add the total fees.
Other research shows that the average two-year fixed-rate is now 6.96%, compared with 6.5% one year ago. However, there is again some good news in that the figure has dropped from its peak at 7.08% of two weeks ago. Big lenders such as Nationwide, Halifax, Abbey and Woolwich have all cut rates recently.
Experts are stopping short of saying that the corner has been turned, especially as swap rates – which drive the fixed mortgage rates – have started to edge up again in recent days, and banks are unlikely to absorb this cost themselves.
Yesterday Woolwich (part of Barclays) cut its five and ten-year fixed rates and its Lifetime Tracker rates, but only for those with a whopping 40% deposit. The ten-year fix now has a rate of 5.97%, with the five-year equivalent at 6.29%.
