Mortgage arrangement fees see phenomenal rise

The hidden fees charged by mortgage lenders have often been a point of contention for many consumer groups and borrowers across the UK. However, new research from personal finance site moneyfacts.co.uk has revealed some startling increases in mortgage arrangement fees over the last two years - many of which do not appear in the mortgage best buy tables that many potential homeowners rely on to choose the ideal mortgage for their needs.

Essentially, best-buy tables exist to show potential homeowners the most competitive and advantageous offers out there. But their failure to take into account hidden mortgage arrangement fees is letting consumers down, according to moneyfacts.co.uk. Their study concludes that some mortgage arrangement fees have gone up six fold in the last two years. For instance, Intelligent Finance - a subsidiary of Halifax - saw its mortgage arrangement fee rise from £499 to £2999 in this period: that's a hike of 600 per cent.

Moneyfacts.co.uk comments that most mortgage best-buy tables are calculated on competitive rates of interest - and if a particular mortgage lender offers a competitive rate of interest but its arrangement fees are exceptionally high, the true cost of the mortgage won't be reflected in the table. As a result, some homebuyers who rely on tables to inform them of the best mortgage deals out there could effectively be fooled into thinking that they're getting the most competitive deal, when they are in fact losing out.

Lisa Taylor from moneyfacts.co.uk commented:

"Lenders know that people tend to judge mortgages based on the headline interest rate. Consequently, they can use this to offer what appears a good home loan only then to introduce the arrangement fee as a sting in the tail."

So if you're looking for a mortgage, how do you go about ensuring you receive the most competitive interest rate while still avoiding high mortgage arrangement fees? Well, you don't necessarily have to avoid best-buy tables altogether. A simple browse through a reputed mortgage best-buy table or a search on a consumer comparison site online is likely to yield the most competitive mortgage deals out there.

But once you've found a mortgage that seems to suit your financial situation well, make sure you call up the particular mortgage lender and find out what their mortgage arrangement fee is before you make your mind up. For instance, it's possible that the mortgage with the most competitive rate of interest will charge you in excess of £2000 in arrangement fees, while another mortgage deal with a slightly higher rate of interest will only charge you £500. In the long-term, this could mean significant savings. And with Bank of England interest rates having experienced a steep upward turn over the last 12 months, you'll want to make sure you can save every penny possible.

Article Source: http://www.mycontentbuilder.com

Paul McIndoe is a recent university graduate whose hobbies include water-skiing and rock climbing.

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