Although mortgage rates are relatively static, fee-free mortgages now represent 40% of the mortgage market, against 36% in July 2017 and 38% in January this year, according to the latest research from Moneyfacts.co.uk.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said the increase in the number of fee-free deals by 274 since the start of the year is great news for borrowers looking to keep costs down.
However, as the number of fee-free deals has increased, so too has the average fee, rising from £979 in May to £990 today.
Nelson added: “Providers have always used fees to compensate for a lower rate so, borrowers now must become wise to this tactic, particularly with more no-fee deals on the market.
“Many borrowers focus on achieving the cheapest possible deal, and while this should be admired, they may be missing out on offers that could be more cost-effective in the long run. For example, borrowers opting for the lowest two-year fixed rate deal at 75% loan-to-value would be £1,131.80 worse off compared to someone opting for the lowest deal without a fee.
“Ignoring the fee-free options on the market can be a costly mistake as fees can mount up, particularly if you remortgage multiple times over the lifetime of your mortgage.”
Fee-free deals do not mean borrowers will have no fees whatsoever to pay, as there are other costs such as valuation and legal fees to keep in mind, Nelson said.