More Mortgage Incentives, But Watch Out for Rising Fees!

The average fee for fixed rate mortgages (excluding no-fee products) has seen a noticeable increase. As of the end of November 2023, the average fee stands at £1,108, marking a £21 rise since the beginning of the month. This uptick in fees is significant for anyone currently in the market for a new mortgage or considering refinancing their existing one.

Incentives on the Upswing

Despite the increase in fees, there’s good news in the form of more lenders offering incentives. These incentives include free or refunded valuations and legal fees. Here’s a quick breakdown:

Valuation Incentives: The percentage of fixed rate mortgage deals offering free or refunded valuation fees has jumped to 76%, up from 70% at the start of November.
Legal Fee Incentives: Deals that include free or refunded legal fees have also seen an increase, rising from 42% to 44% over the same period.

Detailed Market Analysis

To give you a clearer picture, here’s a detailed analysis of the fixed mortgage market over the past two years:

Product Fees: Average fees have fluctuated, showing an overall increase from December 2021 to November 2023.
No-Fee Deals: The proportion of no-fee deals has slightly decreased, currently at 35%.
Legal and Valuation Incentives: Both these incentives have seen a rise, with deals offering legal fee incentives increasing to 44% and valuation incentives to 76%.
Cashback Offers: Deals with cashback options have slightly increased to 26%.

Interest Rate Trends

The average interest rates for fixed mortgages have experienced significant changes:

With Fee: The average rate for deals with fees went from 2.94% in December 2021 to 6.23% by the end of November 2023.
No Fee: Deals without fees have shown a similar trend, with the average rate increasing from 2.67% to 6.09% over the same period.

Expert Insights from Rachel Springall

Rachel Springall, a finance expert at Moneyfacts, offers valuable advice. She highlights the positive trend of lenders offering more incentives but warns borrowers about the increased upfront costs due to rising fees. Springall emphasizes the importance of considering the overall cost of a mortgage, not just the interest rate. She advises borrowers, especially those with limited funds for upfront costs, to look for deals that offer fee-free options or those that cover legal fees and valuations, sometimes even providing cashback.

Key Takeaways for Borrowers

Cost of Living Crisis: Amid the current economic challenges, finding ways to save money upfront and over the mortgage’s lifetime is crucial.
Refinancing Benefits: Those refinancing could save significantly, especially if they are currently on a standard variable rate.
First-Time Buyers: Those entering the market for the first time should consider deals with incentive bundles to offset their initial expenses.