Mortgage lenders quietly bump up their fees

Leading mortgage lenders are quietly raising their fees and charges in order to replace the profits they have lost from offering cheap interest rates, home loan experts claim.

Leading mortgage lenders are quietly raising their fees and charges in order to replace the profits they have lost from offering cheap interest rates, home loan experts claim.

Independent mortgage brokers say some of Britain's best-known lenders have been raising charges in order to pay for an ongoing interest rate price war between banks and building societies.

Melanie Bien, an associate director of mortgage adviser Savills Private Finance, said: "Many lenders have increased their fees because, with interest rates still at close to an all-time low, they are desperate to find other ways to boost their profits."

Savills said the latest fee increase, at Halifax Bank, was part of the trend. The lender has just introduced a new range of tracker deals, on which early redemption charges that hit people who repay their loans early, have been doubled.

Other lenders to have raised fees in recent months include Portman Building Society, which has put up some arrangement charges from £300 to £599. Nationwide Building Society has raised its product reservation fees from £249 to £389.

At Cheltenham & Gloucester, the arrangement fee is now £399, compared with £299 last year, while Derbyshire Building Society recently raised its application fee for capped-rate mortgages from £200 to £275.

Rival lenders, including Northern Rock, Abbey, Woolwich and Alliance & Leicester, have made similar increases. Where borrowers are arranging small mortgages, the extra fees could outweigh the savings they make from choosing a lower interest rate, Savills warned.

James Cotton, a mortgage adviser at broker London & Country, said: "Interest rates are what grab the headlines and what lenders put in their branch windows, so providers are keen to keep these as low as possible.

"Lenders' profit margins have been squeezed by the continuing low-interest-rate environment, which is why we are now seeing this trend towards higher charges."

A spokesman for Halifax said it had raised early redemption charges on the tracker loans because some borrowers had been paying off their mortgages during the term when special rates apply. "This is a way for us to at least break even," he said.

The fee increases also follow growing evidence that the housing market is continuing to slow, reducing demand for mortgages.

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