Mortgage blog: “Sneaky” fees make it almost impossible to find the best deal

Posted 13 November 2014 by Keith Osborne

Banks have been accused of introducing dozens of “sneaky” charges which have resulted in mortgage fees doubling the last five years. Consumer group Which? has revealed that the average mortgage fee is now more than £1,500 and that the different types of fees have made it almost impossible for consumers to find the best deal.

In some cases just three in 100 borrowers could identify the best overall deal, suggesting that finding the cheapest product has never been more difficult.

40 different types of fees push up average mortgage fee to £1,588

New research from Which? has found that banks now charge more than 40 different types of set-up fee. The average charge has also risen sharply, from £878 in 2009 to £1,588 this year.

The consumer group revealed that some fees were so unclear that just three in 100 people questioned could correctly identify the cheapest deal from a list of mortgages on offer. As a result, many borrowers who thought they were getting a good deal were being tricked out of thousands of pounds.

Richard Lloyd, executive director of the organisation, said: “The complex range of fees and charges prevent people from finding the best deal as the total cost is not clear.”

The various different charges currently levied by banks and building societies now include:

  • Administration fees
  • Assessment fees
  • Completion fees
  • Product fees
  • Booking fees
  • Reservation fees
  • Application fees

Why you should compare the fees and the interest rate

High fees can make seemingly cheaper deals much more expensive to borrowers because the impact of the fees wasn't made clear, Which? said.

For example, HSBC currently offers a two-year deal at 1.49% which means that if you are borrowing £100,000 your monthly repayment would be around £407. However, the deal comes with a fee of £1,999 which takes the total cost over two years to £11,767.

Overall, this makes the deal more expensive than a higher rate offered by Norwich and Peterborough. While the rate is higher – at 1.89% – the fee is just £195. This means the same borrower would pay just £10,251 over the two years – a saving of £1,516.

Keith Osborne, editor of, says: “With over 40 different types of fee currently being charged it’s never been more important to compare the overall cost of a deal including both the interest rate and the fee.

“If you’re taking out a smaller mortgage then it often pays to pick a higher rate with a lower fee. However, if you need a larger mortgage then it may benefit you to pay a bigger arrangement fee to benefit from a more competitive rate.”

Which? concluded that the wide variety in charges between lenders suggested that fees didn't “reflect the true cost the lender incurs” and called on the government to ensure costs could be compared more easily.

“The Chancellor should act to stop sneaky fees and charges and end mortgage confusion for consumers,” Lloyd added.

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