Mortgage incentives remain volatile as product fees rise: Moneyfacts

“These options can save borrowers on the upfront cost of their deal, but it’s vital to be conscious of the true cost of any mortgage before they apply.”
– Rachel Springall, finance expert at Moneyfactscompare

Fixed mortgage rates remain volatile and the average fee charged on fixed deals has risen over the past 12 months, according to the latest data from Moneyfactscompare.

Mortgage product fees have risen on average. At £1,141, the average fee currently charged on a fixed rate mortgage deal (not including no-fee products) has risen by £46 since March 2023.

The proportion of the market offering fixed rate mortgage deals that offer a free or refunded valuation incentive has fallen to 73%, from 75% this time last year, while the proportion offering free or refunded legal fees is down from 45% to 44%.

In addition, the proportion of the market offering cashback has dropped by 9% since March 2023.

Rachel Springall, finance expert at Moneyfactscompare, said: “Borrowers concerned about rising fixed mortgage rates would be wise not to rush when comparing deals and ensure they consider the overall true cost package, as the average mortgage fee has crept up. There is an abundance of deals to suit different needs, some may be headline-grabbing rates, but these can also charge a high upfront fee. The best mortgage will come down to how much someone needs to borrow and for how long, so seeking independent advice to crunch the numbers is wise. Those borrowers looking to remortgage right now will find some of the lowest rates will cost them more than £1,000 in a product fee, but a mortgage with a slightly higher initial fixed rate and lower product fee could be a better package based on true cost.

“Mortgage interest rates remain volatile, and this may well be the case for the next few weeks. However, even if borrowers lock into a rate that’s slightly higher than what may have been available a few weeks ago, borrowers could still get an attractive package by finding a deal that has some cost-saving incentives, a reasonable product fee, or no fee, and maybe even cashback. It would also be more cost-effective to move off a standard variable rate and onto a fixed deal, based on average rates. First-time buyers might need to save on the upfront cost of their deal or opt for a mortgage that comes with a bundle of incentives, such as cashback. These packages may be more suitable if new buyers have exhausted all their savings on a deposit, removal and furnishing costs.

“The majority of the fixed mortgages on the market will offer borrowers a free or refunded valuation incentive, and just under half of all fixed deals will cover legal fees. Just over a third of fixed mortgages on the market do not charge a product fee, and on those deals that do charge a fee, some lenders can allow borrowers to add it to the mortgage advance. These options can save borrowers on the upfront cost of their deal, but it’s vital to be conscious of the true cost of any mortgage before they apply.”