Moneyfacts: Mortgage fees and rates rise year-on-year

At £1,075, the average fee currently charged on a fixed rate mortgage deal has increased by £57 year-on-year, according to Moneyfacts.

However, it has fallen by £6 compared to April when it was £1,081, which was the highest on Moneyfacts records since November of 2012 (£1,095).

The proportion of the market offering fixed rate mortgage deals that do not charge a fee reduced from 40% in June 2020 to 35% at the start of this month.

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Average rates for fixed mortgage deals at all loan-to-values (LTVs), both with and without a fee, increased by 0.65% and 0.55% respectively year-on-year; these rose by 0.16% and 0.08% respectively over the last two months alone.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “Building a deposit over the last year has been no mean feat, and this has not been made any easier with savings rates languishing at disappointing levels, therefore the return of 95% mortgage products to the sector will have been welcomed by many, particularly first-time buyers.

“House prices have continued to increase over the last year with recent research from Keller Williams UK indicating that in some parts of the UK, the average deposit required has increased by over £11,000.

“Cash-strapped prospective borrowers may therefore have limited funds available to meet the costs associated with taking on a mortgage, so comparing upfront costs is vital.

“The average fee charged on a fixed rate mortgage (excluding no fee deals) of £1,075 is £57 more than a year ago, and the percentage of the market where fixed rate products are offered without a fee has shrunk by 5% over the same period to 35%.

“Lenders may be raising fees to gain margins in the aftermath of a fixed rate war, and this may also potentially be linked to the resurgence of sub-1% mortgages as, whilst eye-catchingly low, these initial rates can also carry the highest fees.

“Borrowers may then need to search a little harder if they are looking to keep mortgage costs to a minimum or secure a fixed rate mortgage without a fee.

“Borrowers may be disappointed to see that average fixed rates have continued to rise of late, but overall, this may be attributable to the return of traditionally higher rated, higher loan-to-value (LTV) products.

“Our latest data shows that current average fixed mortgage rates at all LTVs for deals with a fee (3.08%), and for those without a fee (2.87%), are both over 0.50% more than they were this time last year.

“The average rate on a deal without a fee is 0.19% lower than in June 2019, so those who are looking to secure a new mortgage may wish to consider acting swiftly, especially considering that both the average rate for deals with a fee and those without a fee rose by 0.16% and 0.08% respectively over just the last two months.

“It is a pleasant surprise to see stability over the past two years in the proportion of fixed deals that offer incentives, which may suggest lenders are still working hard to offer an array of products to entice customers.

“Therefore, despite increases to rates and fees alike, there are clearly still great deals out there for borrowers to consider.

“These changes strengthen the need for borrowers to secure the support and advice of a qualified broker who can help to assess the true cost of a deal, carefully looking into whether or not it is beneficial to pay a fee or to stomach a slightly higher initial rate and consider what, if any, incentives may be important for their customer.”