The Times - Tempted by a mortgage deal? Check the small print

by Aaron Strutt

Dec 01 2023

Lenders are cutting mortgage rates as they compete for business — but watch out, some of the cheapest rates come with higher upfront costs. 

The average fee — sometimes called a product fee or an arrangement fee — charged on a fixed-rate deal has increased by £21 since the start of November to £1,108, according to the analyst Moneyfacts.

Aaron Strutt from the mortgage broker Trinity Financial said: “Mortgages with higher fees tend to have the lowest headline rates, so borrowers are essentially paying bigger set-up fees to reduce their monthly repayments.

“It generally makes sense to pay higher fees if you have a larger loan as the lower rate will have a big impact on monthly repayments. If you have a smaller mortgage, a lower or no-fee option is more suitable.

“Before you agree a mortgage, it is well worth checking the fee and ensuring you run the sums and are not overpaying. Many borrowers add the arrangement fee to the loan and pay more interest over the mortgage term,”

Aaron added: “But lenders typically allow 10 per cent overpayments each year, so it is possible to repay the fees when you have the spare cash.”

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