According to the latest data from the financial comparison website Moneyfacts, the average fee charged on a fixed-rate mortgage deal has risen by £89 since 2020, going from £1,040 to £1,129
Homebuyers are taking a financial hit as not only have house prices and mortgage rates increases – but so has the fees charged on them.
According to the latest data from the financial comparison website Moneyfacts, the average fee charged on a fixed-rate mortgage deal has risen by £89 since 2020, going from £1,040 to £1,129. While this average fee has fallen by £11 since March 2024, it has been above £1,000 since July 2017.
This means borrowers who locked into a cheap fixed rate in 2020 will notice even higher costs when they come to refinance. Although some of the UK’s biggest lenders are cutting rates to below 4%, Rachel Springhall, finance expert at Moneyfactscompare.co.uk, said that the rate is not the only thing borrowers should be looking at.
She explained: “Borrowers need to check the overall cost of any mortgage, which includes any fees or cost-saving incentives. The best deal depends on someone’s circumstances and how much they need to borrow; someone with a larger debt would typically chase a lower rate, whereas those looking to avoid upfront costs would consider fee-free deals and incentives.
“The lowest fixed mortgages on the market typically charge upfront fees of around £1,000, or even up to £2,000, so a mortgage with a slightly higher initial fixed rate and lower product fee could be a better choice.”
A deeper analysis from Moneyfacts found that the quantity of deals that do not charge a product fee, dropped to 36% from 41% five years ago. Alongside this the proportion offering fixed-rate mortgage deals that give free or refunded legal fees incentive has fallen by 7% from 49% to 42% since 2020. The proportion of the market offering cashback on products has also dropped 9%, while the number offering fixed rate mortgage deals with a free or refunded valuation incentive has risen to 73% from 72%.
Rachel added: “More often than not, borrowers can find a deal with a free or refunded valuation incentive, and just under half of all fixed deals will cover legal fees. Those looking to remortgage will likely want to keep costs down and refinance without too much effort, so mortgage bundles are a great choice to avoid the worries of covering upfront fees.
“First-time buyers may also have exhausted all their disposable cash on a deposit, removal and furnishing costs, so a cashback deal with a bundle of incentives could be ideal. Lenders could also add upfront fees to the mortgage advance, so it’s wise for borrowers to seek advice to navigate all the options available to them before they commit.”