An analysis conducted recently in the UK prompted the article, as it identified that fee-free UK mortgage offers are more expensive than deals with an application fee for consumers with a mortgage of £57,000 or more. This is because the interest rate is usually higher. With the average new mortgage loan now at just below £140,000, opting for a fee-free mortgage deal could cost many borrowers dear.

Fee-free UK Mortgages Comparison

Example 1a: - Based on a mortgage of £56,000 and someone taking out a two year fixed rate of 4.47%, they would end up paying £5,005 in interest in the first two years. Add the lenders fees of £1,499 and the overall cost is £6,505

Example 1b: - Again, based on a mortgage of £56,000 and someone taking out a two year fixed rate of 5.35% but fee free, they would end up paying £5,992 in interest in the first two years.

Using the same situation as above but based on the average new UK mortgage of £138,000, the figures work out as follows:

Example 2a: - A borrower taking out a two-year fix at 4.47% and paying fees would pay £13,838 over the two years.

Example 2b: - The same borrower taking out a 5.35% two-year fix and not paying fees, would cost £14,766.

It all goes to show that the bigger the mortgage, the more money you will save by choosing the low-interest option mortgage with a fee, rather than a fee-free UK mortgage deal. From this comparison, you should be aware that fee-free mortgage deals are not what they are cracked up to be. Using the services of a whole of market UK mortgage broker can pay dividends here as they will do their homework and expose any pitfalls of such mortgage deals.