It’s been a sad fact that application fees on fixed rate mortgage deals have more or less doubled in the last 12 months according to current research.

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.

After all the panic that’s occurred in recent weeks in the mortgage market lots of people may be tempted to grab the best deal they can and could wrongly focus on rates to exclusion of other considerations.

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.

Lenders in the current financial climate are taking a much tougher line but there will still be lots of very good deals available, unfortunately largely for people with lots of equity in their home and a strong credit rating.

All brokers and intermediaries should reconsider their strategy in helping clients wishing to raise capital in the light of the recent credit crisis and changes to the Consumer Credit Act. The changes in the market and to the Consumer Credit Act mean that a secured loan could be a much better option for many clients.

These new changes changes to the act mean that all secured loans for residential purposes of any size come under the Consumer Credit Act and therefore every loan has to have a cooling off period, so the client is not pressured and an important factor is that early repayment charges are a maximum of two months interest depending when in the current month they notify the lender. When you add in that there are no upfront fees in the shape of application fees, booking fees and valuation and conveyancing costs then it’s pretty easy to work out that on a direct comparison secured loans work out to be better value for clients.

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.

Tags: Business

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