Mortgage blog: Customers urged to check fees as lenders continue to cut rates

Posted 21 August 2013

If you're looking for the very best mortgage deal, consulting the ‘best buy' tables online or in a newspaper is often a good place to start. However, experts have issued a warning this week that arrangement fees attached to the lowest rates are continuing to rise and that borrowers should take the total cost of a deal into account before signing up.

The West Bromwich Building Society has become the latest lender to launch a record-breaking deal but its new fixed rate comes with a staggering £2,494 arrangement fee.

Mortgage arrangement fees hit a 25-year high

While mortgage rates continue to tumble, borrowers are being warned to look out for huge arrangement fees which have now hit a 25-year high. reports that the average fee today across all fixed- and variable-rate mortgage deals has reached £1,545, a rise of £135 since January and the highest recorded in 25 years.

Rachel Springall, finance expert at, says: "Low rates are often compensated by high fees, so these should never be overlooked. A mortgage deal should not be taken out by rate alone, as it is the overall cost and package that counts."

The warning comes after the West Brom launched the cheapest ever two-year fixed-rate mortgage at 1.48%. Available to a maximum of 60% loan-to-value, the deal comes with a fee of £2,494. The building society has undercut the previous best deal - an HSBC product at 1.49% - although the deal comes with a fee that is £495 higher than its rival.

The Guardian reports that if you were to take out the two-year West Brom deal, you would pay around £598 in monthly mortgage repayments, compared to £655 for a two-year fix with Norwich & Peterborough on a rate of 1.99%. However, you would pay £1,322 less over the two-year N&P deal if factoring in the low £295 arrangement fee.

"Lenders have been keen to reduce their mortgage rates but, at the same time, have been gradually increasing the arrangement fees charged in the best deals," says Keith Osborne, editor of "It's never been more important to take into account both the interest rate and the associated fees when choosing a new mortgage. As the example above suggests, picking in interest rate that's a third higher than a rival lender can still result in significant savings simply because of the different arrangement fees."

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