Over the past year the number of mortgages charging a percentage fee has increased from 43% of the market to 49%, according to MoneyExpert.com.
Percentage fees vary from as much as 2.5% of the mortgage loan to as little as 0.4%. The average percentage fee comes in at 0.89% and on a typical home loan of £150,000 this equates to a fee of £1,335.
For those people with large home loans these fees can run into thousands of pounds, particularly as only 4% of products that charge a percentage fee impose a cap of the maximum fee.
Correspondingly the number of fixed rate mortgages charging a set fee has decreased as percentage of the market from 57% to 51%. There are currently 472 products charging a set fee.
The highest charge on the market has increased significantly. Last year a number of lenders charged up to £1,999 but today the highest figure on the market is £2,499 from Bank of Scotland, one of the bailed-out banks, signifying an increase of 25% on the highest market fee. (This product is for borrowers looking to borrow up to 90 per cent of the value of their home.)
The total number of products charging a set fee has increased from 405 to 472 as the market has expanded. The increase consists largely of the introduction of new tiers of fees by the banks. Last year for example there was only one mortgage charging a fee of between £100 and £200 but today this figure has increased to 49. Similarly, a year ago there were 17 products charging between £700 and £800 but today there are 61 products.
Average fees have actually decreased slightly from £860 a year ago to £790, largely due to the introduction of a large number of mortgages charging a small set fee rather than a percentage fee.
Pierre Williams, head of research at MoneyExpert.com, said: “Borrowers looking for a mortgage focus on rate, but fee has to be a consideration particularly when these can run into thousands of pounds. All too often we forget about the fee by rolling it straight into the loan.
“Fees are often linked to loan to value ratios and anyone without a significant amount of equity in their house can expect to pay a hefty fee.
“Borrowers need to make a calculation as to whether they opt for a fixed or percentage fee but with the introduction of large numbers of low fee mortgages this year borrowers do have options when it comes to choosing a mortgage.”
