Application fees on the best buy fixed-rate mortgage deals have nearly doubled in the past year, according to current analysis.
In the last year alone, the fees on the five most competitive two-year fixed deals have moved from an average of 999 up to 1,478. And for three-year deals the average level of fees has moved from just 578 to 1,132 now.
If you go back to last October when the base rate was 5.75% the average two year fixed deal was at 5.68%. The base rate is now 5% but the 2 year rate is still 5.57%. Three year fixed rate deals are also more expensive compared to the base rate. They have gone down from 5.84% to 5.65% in the same period.
All the recent publicity recently about the credit crunch and the bank’s fluidity problems has stoked the near panic in people and they are tempted to grab the best percentage rate deal they can find. The problem is that very often they overlook the fees which when added to the 2 or 3 year deal make the mortgage a lot more expensive than it first seems.
People really need to consider seriously the cost of these fees. It’s too easy to just focus on the interest rate that’s been charged but especially in a shorter term deal they will have a serious impact on the true cost of the mortgage.
Even in todays uncertain financial circumstances there are many good deals to be had but people with not much equity in their homes or without a perfect credit score are unlikely to be able to get some of these deals as Banks and Building Societies and increasingly taking a tougher line.
Recent changes to the Consumer Credit Act and also the tightening of the financial markets which have restructured mortgage fees mean that possibly brokers and intermediaries should be pointing their clients towards a secured loan as it could be a much cheaper option than re-mortgaging the family home.
The major impact of the changes to the Consumer Credit Act is the fact that every secured loan for residential purposes is now under the umbrella of the Consumer Credit Act and therefore there’s a compulsory cooling off period which takes pressure of the individual and also there is a ceiling on early repayment charges of two months interest (depending on when in the month they tell the lender). When you also take into account that there are no valuation, conveyancing, booking and application fees it doesn’t take a genius to work out that these secured loans are probably more advantageous to the client.
The whole point here is that if you are tied in to your current mortgage provider, in some cases even if you’re not, and wish to raise some money or simply restructure some finances then consider a secured loan as an alternative to a re-mortgage. The protection of the Consumer Credit Act and also the saving of the upfront fees and the much smaller early repayment charges mean that a secured loan could be much easier to arrange and quite a lot cheaper.