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Mortgage Rates Down, Fees Up

Mortgage Rates Down, Fees Up

Category: Mortgages

Updated: 31/10/2008
First Published: 07/08/2008

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Mortgages Fees

In recent weeks many lenders have announced cuts in their mortgage rates, leading to many people predicting that we may have turned that corner. The average rate on a two-year fixed rate mortgage has dropped from 7.08% at its peak on 11 July to 6.90% today, but typically there is a sting in the tail.

During the last month the average fee has increased by nearly £100, meaning that borrowers have not benefitted as much from a reduction as expected.

Average 2 year fixed rate

Average 2 year fixed fee

True cost over 2 years on a £150K mortgage

6 August 2008




4 July 2008








Source: 6.8.08

On a £150K repayment mortgage, a £100 increase in fee equates to an additional 0.06% increase in the rate. Therefore, in real terms a customer has only benefitted from a net 0.09% reduction in the average rate, as opposed to the full 0.15%.

Research conducted by has shown that some lenders have increased rates and fees and not brought either back down. Other lenders have reduced rates but increased fees; some lenders have switched from charging a fixed monetary fee to offering a percentage fee.

On a positive note, swap rates have continued to fall and are now at their lowest level since 13 April. Predictions are that we should see further decreases in fixed rates from high street lenders before too long.

It is imperative that anyone looking for a new mortgage deal makes sure they consider the true cost of the deal and not just look at the headline rate being offered.

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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