New figures have revealed that the average mortgage fee has shot up by an incredible 30% in the last three years alone, and now stands at over £1,500.
So why are these fees rising, and what will it cost you?
The data, produced by Moneyfacts, pointed out that these hikes have come in three years when Bank of England interest rates have stayed at rock bottom. During that time, the average arrangement fee has risen by £321 to £1,502.
Why?So why are fees rising? Ray Boulger, mortgage expert with broker Charcol, told AOL that typically one reason for this may be that mortgage companies are reducing rates and paying for this with increased fees. However, he says that in this instance, this is highly unlikely, as fluctuations in mortgage costs are dependent on far more variables than a balance between fees and rates.
He explains: "This is much more likely to come down to the fact that lenders are offering a wider choice, some with larger arrangement fees and some with no fees. An increase in the number of mortgages with higher fees will push the average higher."
Should you pay a fee?According to Boulger, this means that the average figure is relatively meaningless, and that you shouldn't have to pay any more for your deal.
He highlights that large fees aren't necessarily fundamentally poor deals. He says it varies between deals and lenders, but as a very general rule of thumb, once you are borrowing around £100,000 or £120,000, it may be worth paying a larger fee. He also says that if you are borrowing over a longer period, larger fees tend to work out as a better deal.
The mathsThe only way to tell if a deal is right for you, says Boulger, is to do the calculations yourself. You need to take into account the arrangement fee, valuation fee, legal fees and any exit fees. Add these to the total interest you'll pay over the term of the mortgage, and then you can compare total costs.
Fortunately you can plug there details into a mortgage calculator on any of the major comparison sites, and it will spit out a total cost for the loan.
Boulger, however, warns: "Consumers can struggle with this. We used to offer a no-advice online service and found that when a customer was offered two deals (one with a low interest rate and a high fee, and the other with a low fee and a high interest rate) in a third of cases they chose the wrong deal."
"I believe that having a wider choose is a positive thing, but only if consumers either understand how to do the calculations themselves or they get advice."