The cost of applying for a UK mortgage has risen considerably in the past three years alone ? in addition to a steady increase prior to this period. The hike in application fees has occurred despite UK mortgage lenders cashing in on increased earnings via interest collected thanks to soaring property prices and increasing average mortgage balances.
In addition to the increase in UK mortgage arrangement fees - the cost of exiting a mortgage - has risen considerably within the same three year period.
The cost of redeeming a UK mortgage during a fixed interest rate period can be as high as 5% of the balance of the mortgage. A UK mortgage that is redeemed without an early repayment charge can still cost the borrower several hundred pounds, particularly if there is a remortgage involved.
Lenders seem to be attempting to find as many different avenues as possible to add extra fees on to mortgage products. When one set of fees decreases, application fees for example, another set of fees such as redemptions penalties will increase. It is clear that fees are a necessary income stream for lenders so it is difficult to foresee a time when they will stop increasing.
This is particularly the case because a more competitive UK mortgage market has lead to a situation in which lenders must compete on the interest rates they offer. This means that they are no longer deriving all their income from the interest they charge. Home owners have benefited from the increased competition through lower interest rates, however, this has not translates into lower mortgage fees.
Because fees now comprise a significant expense to borrowers it is important to include them in any mortgage comparison when assessing which UK mortgage is the best for their particular circumstances. It is no longer good enough to simply compare the headline interest rate.
The true cost of a UK mortgage is demonstrated by the Annual Percentage Rate (APR). The APR presents a truer representation of the true cost of a UK mortgage than the headline interest rate meaning that the lower the APR, the more cost-effective the mortgage is.
However, it is still not good enough to base a decision solely on comparing APRs of competing UK mortgage products. Other factors, such as the service levels of the lender and the flexibility of the UK mortgage, should also be taken into account.
Selecting the right UK mortgage product can be a confusing task so it is a good idea to speak to an independent mortgage broker for impartial advice if required. An independent mortgage broker will have specialist software that can scan the entire UK mortgage market to help select the right product to suit an individual's personal financial circumstances. Remember ? the APR will not tell the whole story so pay attention to the fees that are charged when selecting your next mortgage.
Cheif economist at Nationwide, Fionnuala Earley said: "With the cost of mortgages starting to come down, activity could increase and restore some liquidity to the housing market," although she added that this will not be an "overnight" turnaround.
Banks and building societies have been able to trim the cost of their mortgage products because swap rates have passed their peak and have been falling recently.
Mark Leaper of moneymatchmaker.com, UK Price Comparison website commented after the Nationwide monthly house price figures for July were released - revealing a 1.7 % fall - went on to say that interest rates should soon start to reduce as the slowing economy curbs inflation.
Leaper went on to say that the credit crunch, brought about the collapse in confidence within the US investors had caused real pain for the uk homeowner with unusual circumstances. He add that in recent years, people had started to expect that mortgages and loans would be available, even with a poor credit rating and the loss of these products had really stiffled the markets and added huge pressure and stress onto a large proportion of homeowners.
As well as the worry of borrowing money, the cost of living is on the up and British Gas has been slated over news that it intends to apply new price increases, just a day after its parent company Centrica stated it had made large profits.
The firm has said prices will rise by 35 per cent a day after Centrica revealed profits of nearly £1 billion, a move that has sparked anger among bodies concerned that this could add to debt and poverty, such as those struggling with repayments and needing mortgage help.
Child Poverty Action Group said: "These staggering energy price hikes risk hitting the poorest families hardest. At a time when the cost of living is rising this is bad news for families and will cause further fuel poverty."
The body called for the company to consider the interests of hard-hit consumers ahead of those of its shareholders.
Energy price comparisons are available from providers right accross the uk, with real savings being made by switched people that are prepared to take the effort to look and switch providers.
Both Michael Sterios & Mark Leaper are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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