Here, Which? unpacks how fees on the best deals have increased, who may be suffering from this trend, and how you can find the most affordable mortgage product.
Market-leading deals now come with fees
We compared the top 10 leading products (by rate) available on 25 September, with the top 10 deals available on 24 July across 60%, 75%, 90% and 95% loan-to-value ranges.
Of the 40 leading products, 15 were fee-free in July. In contrast, in September there were no fee-free products in the top 40.
Where can you find fee-free deals?
In July, you wouldn't have to look far down the list of the best deals to find a fee-free one, they were either the best rate or second-best rate, but now fee-free deals are harder to find.
The first fee-free deal on a 60% mortgage in September was the 46th cheapest rate, for 75% and 90% mortgages it was the 26th lowest, and for a 95% deal it was the 14th.
Find out more:How do fees impact the value of the deal?
We compared the market-leading deal in September with the best fee-free deal from July, to find out the overall cost.
NoteBorrowers who took out the best fee-free deal at a 60% or 75% LTV in July would have been better off with September's market-leading rates that are lower but come with a fee. But the reverse is true for first-time buyers with smaller deposits, as borrowers at 90% or 95% LTV would have paid less in July, even though interest rates were significantly higher.So while interest rates on mortgage deals may have fallen, it's vital to check how the fee impacts the overall cost of your deal.Is a fee-free deal better?
When we compared the cheapest rate with the best fee-free deals in September we found that across each LTV the fee-free deal was cheaper overall.
Should I add the fee to my mortgage?
Your lender might allow you to add the fee to your mortgage, but beware this will increase the amount you're borrowing and therefore what you pay interest on. It also might not always be possible if you are at the limit of what you can borrow.
How to find the best mortgage deal
When searching for a mortgage deal, always look at the extra costs involved, these come under different guises, such as a product, arrangement or completion fee.
The highest current charge is £2,995 set by Skipton Building Society for a select number of its products.
Banks commonly set fees between £999 and £1,999, but some use percentages instead - for example 0.5% of the overall loan amount. If you're borrowing a larger sum, this kind of fee can be significantly more expensive.
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source https://www.which.co.uk/news/article/surge-in-market-leading-mortgage-deals-charging-fees-aKv1E9c0HaJj