If borrowers choose to roll fees into their mortgage deal, the proposals suggest brokers should offer sellers two Key Fact Illustrations (KFIs) – one illustrating payments including roll-up fees and the other without.

The regulator concluded an outright ban on rolling fees into a mortgage would not be in the consumer interest. The FSA said it understood rolling up fees was often a cheaper option.

Under the proposals, brokers will be obliged to keep a record of the borrower’s decision

It said: “However, we will expect firms to establish whether rolling-up mortgage fees and charges into the loan is appropriate for the particular consumer, taking into account their needs, circumstances and the financial implications of rolling-up fees, including the extra interest which could accrue over the term of the mortgage.”