Mortgage fees up by 50%

LENDERS are hiking mortgage fees as they are forced to slash interest rates amid intense competition.

Exit and arrangement fees have grown by over half since the beginning of last year. The average fee now stands at £480 compared to just over £300 in January 2004.

There are over 100 lenders competing for business in the UK and companies have been forced to lower their rates to win business in a tightening market.

Nationwide has been branded one of the biggest culprits, increasing its fee from £249 in June to £389 today, a rise of 56%.

Ray Boulger, senior technical manager at Charcol, the company behind the research, said the UK market is the most competitive in the world. He said: 'This competition has been hugely beneficial to the consumer, who has a huge choice of mortgage deals with a combination of different interest rates, fees and features. With this consumer success comes the need for the lenders to make their profit from somewhere.'

Boulger added: 'We often extol the virtues of looking beyond the headline rate at the whole structure of a mortgage, and with arrangement and exit fees clearly on the up, this has never been more important.

'That is not to say that a loan with a high fee is poor value. There is a trade off between fees, interest rate and features.'

Fees tend to be higher on products that offer the customer more security and better rates. For example, fees on fixed-rate mortgages often outweigh those on variable deals.

Northern Rock charges one of the highest fees on the market - £695 for a two-year fixed mortgage at 2.99%. Scarborough Building Society charges just £199 to arrange a 5.29% variable rate.

'As a rule of thumb a mortgage with a higher fee but a lower interest rate will be better value for larger mortgages and vice versa,' said Boulger.