Don't forget house buying's hidden prices

Fees have been rising as well as house prices, warns Stephen Pritchard
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The Independent Online

This year's survey of the costs of moving home, compiled by the Woolwich, will confirm what home buyers already suspect: it has become a seriously expensive business.

Costs for first-time buyers have almost doubled since the start of the decade. They face transaction costs of £9,113, according to the lender. This is up from £4,698 in 2000 - an increase of 94 per cent.

Buyers further up the housing ladder have fared even worse. A family moving from an average semi-detached house to a detached property now faces fees and costs of £12,535.

The increase in fees and charges is outstripping house price inflation by a significant margin. Someone moving from a semi to a detached home will pay about 70 per cent more for the property now than at the start of the decade, while the fees have increased by a massive 176 per cent.

Andy Gray, head of mortgages at the Woolwich, says that some home-buyers now face fees and charges in the region of £25,000.

But the national picture masks regional variations. Fees have outstripped house price inflation in five out of 10 regions in England and Wales. Unsurprisingly, buyers in London and the South-east have seen prices rise the most. In the South-east, moving costs now average more than £15,000.

Much of the increase can be attributed to the increases in stamp duty (now Stamp Duty Land Tax) and the larger number of properties that are now caught by the higher stamp duty bands - particularly in the £250,001 to £500,000 range.

But the Treasury cannot shoulder all the blame. According to the Woolwich's research, estate agents' fees have increased over the past year. Solicitors' fees, on the other hand, fell slightly, reflecting competition in the conveyancing market.

And there are other costs the Woolwich hasn't taken into account. The report excludes both survey and mortgage arrangement fees, yet neither are costs that buyers can afford to ignore.

Survey fees are usually charged according to the price agreed for a property. They are more often set in bands than as a percentage of the sale price, but buyers in London and the South-east still pay significantly more. Surveys organised by lenders, in particular, tend to relate to property prices.

Mortgage arrangement costs - and, for buyers who are selling and paying off an existing mortgage, exit fees - have also risen quite significantly. According to David Hollingworth, director at mortgage brokers London & Country, most banks and building societies now levy fees of at least £300 to arrange a loan, with fees of £500 to £600 common for many fixed rate or tracker mortgages. Exit fees are now often £200 or more.

Some fees are negotiable, however. A bank or building society will usually work to a fixed fee scale for their valuation, but an independent surveyor is more likely to agree a fee based on an hourly or daily rate. This can work to the advantage of buyers of more expensive, but relatively small or straightforward properties.

For sellers, there might also be some scope for negotiating on estate agents' fees. A property that is in good condition and in an in-demand area will sell quickly, even in today's market.

Sellers with this type of property, and those who are not in a chain, could use this to negotiate a commission at the lower end of the one and a half to two per cent charged by most agents.

Buyers and sellers could also do more to shop around for legal services; developments such as e-conveyancing have made this part of moving house, at least, more competitive.

The biggest unknown is the likely impact on costs from the Government's Home Information Packs (HIPs). Current estimates suggest that the HIP will cost sellers between £700 and £1,000; it will be illegal to sell a house without one.

And buyers may not even benefit. If their lender doesn't accept the home condition report that forms a key part of the HIP, buyers will still have to pay for a valuation at the very least. Plus, of course, sellers are likely to add the cost of the HIP to their asking prices.