Research from Moneyfacts.co.uk shows that while headline rates are attractively low, mortgage arrangement fees are at their highest since 2013.

Borrowers have been taking advantage of low mortgage rates, and actively encouraged to remortgage in anticipation of Bank of England base rate rises. However, while headline mortgage rates are low, data from Moneyfacts.co.uk shows that the average mortgage fee currently stands at £1,005, an increase of £15 since August.

Lenders raise fees to recoup costs

“With the average two-year fixed rate is only 0.16% higher than in November 2017, and mortgage rates are still far lower than their costs, lenders need to recoup some of this extra cost,” states Charlotte Nelson, mortgage expert at Moneyfacts.

“As a result, the average mortgage fee has surpassed the £1,000 mark for the first time since August 2013 when it stood at £1,001.”

Borrowers struggle to determine which deal is the best

Lenders are using their headline low rates to attract new borrowers in an increasingly competitive market. However, the combination of low rates and high fees can make it quite tricky to work out what mortgage product will deliver the best deal.

Customers seeking to borrow larger sums may find a low rate and high fee deal the most competitive, while those borrowing smaller amounts will probably get a better deal if they opt for a fee-free product.

What’s the true cost of a mortgage?

According to Moneyfacts, for the average borrower remortgaging every two years the fees will really add up. They would probably benefit more by overpaying their mortgage rather than securing a low rate deal with a high fee.

The advice to borrowers is to look at the true cost of a mortgage, not just an interest rate comparison, before making a commitment. Checking what the arrangement fees and lender incentives do to the total cost of a mortgage over the initial term, is the only way to find out the true cost of a deal.