It said the start up fees can add up to as much as £5687.50 on a £175,000 mortgage.
Research from mform.co.uk shows that around 20 lenders including major firms now have mortgage products which base the application fees charged on the size of the mortgage.
Typically these fees are imposed on shorter-term fixed rate mortgage deals such as one-year or two-year fixed rates.
mform.co.uk warned customers to be wary of fees based on the size of the mortgage as they can substantially add to the true cost of a mortgage deal.
Francis Ghiloni, mform.co.uk marketing and business development director, said: “Fees based on the size of the mortgage advance are becoming more common and can cause confusion for borrowers.
“If customers focus purely on the headline interest rate and fail to take into account fees then they could be in for a nasty surprise. With affordability the key issue across the mortgage market many customers are focusing on interest rate only at the expense of everything else.
“Fees based on the size of the mortgage advance can be a good deal for some borrowers – particularly those who are looking for smaller loans. But for most borrowers they will add substantially to your costs.”
Leeds Building society offers a competitive two-year fixed remortgage deal at 4.99% until September 2009 which charges a 3.25 per cent fee based on the size of the advance, while the Co-operative Bank offers a fee free remortgage at 6.69%. Based on headline rates the latter seems unattractive but for someone borrowing £175,000 on a house they already own worth £300,000 the Cooperative bank mortgage is in fact £37.66 cheaper over the first two years.
