A competitive mortgage market has resulted in an explosion in the number of new products, with 4,500 residential mortgages and 1,000 buy to let mortgages for borrowers to choose from.
However, a new report from Moneyfacts has found that with the array of new products and competitive rates on offer, the average residential mortgage fee today has actually risen to £956 – the highest fee recorded since May 2014, when the average mortgage fee was £973.
Over the past few months, average residential mortgage fees have fluctuated; falling dramatically in 2014, then wavering until last year when a definite uptick was seen.
Today’s figure stands £68 higher than in June 2014.
Commenting on the figures, Charlotte Nelson, finance expert at Moneyfacts said:
"The current mortgage market boasts some of the lowest rates on record, which is great news for borrowers, but the increase in average mortgage fee clearly shows that some of these headline-grabbing rates are being compensated for elsewhere.
"In the current low-rate market, borrowers are being counselled to switch deals once their fixed rate comes to an end, but large fees can make moving to a new deal a costly affair, particularly if borrowers prefer shorter-term mortgages.
Borrowers would therefore be wise to look at the true cost of the mortgage, taking into account any fees and incentive packages, to ensure that the most cost-effective deal is obtained."
Fees and other costs on buy to let mortgages however have changed very little in the past five years according to the latest Buy to Let Mortgage Costs Index published by Mortgages for Business.
Flat arrangement fees in the buy to let sector have averaged £1,500 since 2010, although there was a shift towards percentage-based fees in Q4 2015.
David Whittaker, managing director of Mortgages for Business said:
“The shift may be due to lenders looking for ways to claw back some of their margins which have been lost over time to competition.
Percentage-based fees are estimated to be worth more than flat fees which are not affected by the ongoing rise in property prices.”