Homeowner Loan Fees Starting To Reduce
Despite the fact that many homeowner loan and mortgage products have been offering cheap loan rates over the past year or so, largely due to the currently low level of the Bank of England base rate, there have been concerns that a large number of banks and building societies have been compensating for these low loan rates by including a large arrangement fee at the outset of the loan.
In some cases, this fee can be up to 1.5 per cent of the total loan, which equates to £1,500 on a homeowner loan of £100,000 and although most lenders say that this fee can be added to the loan, interest is then charged on this amount, increasing the overall cost of the loan.
But new research from moneysupermarket.com has found that, on average the cost of these arrangement fees has fallen by somewhere in the region of 25 per cent over the course of the last twelve months, as lenders continue to come under pressure regarding the fess they charge. The news comes as First Direct has announced that it is to reduce its arrangement fees even further on all its offset homeowner loan products and hopefully this action will cause other lenders to follow suit.
Hannah-Mercedes Skenfield of moneysupermarket.com said “This is a welcome move by First Direct, which brings its arrangement fees down to a more palatable level. Borrowers however, still need to be vigilant as often the devil is in the detail; generally products with the lowest interest rates attract the highest fees.
We have seen significant drops in the average fees on mortgages over the last year but this has been driven by lenders not passing on the benefit of the significant drop in the cost of funds by charging higher interest rates. Borrowers need to shop around to make sure they are getting the best deal on both rate and fees.”
