House Prices on the Way up – Good or Bad news?Every mortgage comes with fees, but according to a recent report by Which?, the well-known consumer group, there are over 40 names attached to them in the UK.

The average cost for arranging a mortgage has nearly doubled within the past five years alone. Back in 2009 the average fee was approximately £878. Now it is around £1,588. This is £710 more, and it has occurred during a period of time when the base rate announced by the Bank of England has been at 0.5%.

Falling mortgage prices are only half the picture

People tend to look at the interest rates attached to a mortgage when shopping around for a good deal. However this does not provide a truly accurate picture of how much an individual is paying for a mortgage, since it does not include the fees attached to it.

The Which? study revealed the various names used for fees include admin fees, completion fees, mortgage questionnaire fees and application fees, to name just a few. Furthermore when these fees were taken into account just 3% of those who took part in their questionnaire were able to pick out the best deal when given a selection of mortgages to choose from.

This means that while mortgage rates have fallen over the last few years people are still not getting good deals owing to the confusion surrounding the fees charged by banks and other mortgage providers.

Could changes be made?

The consumer group is hoping that Chancellor George Osborne will make reference to the murky world of mortgage fees in his Autumn Statement this year. They suggest that working with the industry to streamline fees and make them less complex would help homeowners find better and cheaper deals for their mortgages.

The campaign put together by Which? is called Stop Sneaky Fees and Charges. The fees and charges themselves are not the only concern either. It is perfectly possible for one bank to call a specific fee by one name, while another bank calls the exact same fee by another name entirely. This means consumers cannot accurately compare different mortgages side-by-side, owing to the confusion between the myriad of names used for a variety of different charges.

An example was given whereby HSBC offered a mortgage for 1.49% with a fee of £1,999. Meanwhile the Norwich and Peterborough Building Society offered a mortgage with a higher rate of 1.89%; however this had a fee of just £195. The latter deal is actually the better one in this example, since two years of payments on this deal would add up to £10,251. This compares to paying £11,767 for the HSBC deal – a not-insignificant difference of just over £1,500.

Clearly something needs to be done to ensure those looking for an affordable mortgage deal are better able to compare the various options on the market at the moment. If not, many more homeowners could end up choosing more expensive UK mortgages as a result.

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