Mortgage pricing structures create minefield

Traditionally, lenders charged a fee to cover the administration costs associated with providing a mortgage, however, in recent years many lenders have been increasing application and booking fees to offer lower headline rates while maintaining margins.

These fees can either be charged as a fixed amount or as a percentage of the mortgage amount, sometimes up to 3.5% of the loan size, so it’s important for consumers to understand how this will impact the total cost of the mortgage before applying.

The analysis also shows a rise in booking fees which allow consumers to reserve a mortgage rate offer when their application is agreed upon in principle. The average fee for fixed products has gone up £9 over the past 18 months and £7 for tracker products over the same period.

Clare Francis, mortgage spokesperson at moneysupermarket.com said: "The mortgage market can be a minefield because of the different pricing structures lenders use. In some instances, the lowest headline rate may not actually prove to be the cheapest option because of the other charges borrowers will incur.

"It’s vital that prospective mortgage customers look beyond the headline rate and dig a little deeper to find out the true cost of the mortgage, otherwise they may end up paying back more than they bargained for."

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