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Mortgage application fees double in three years

Mortgage application fees have nearly doubled since 2004, research from find.co.uk reveals.

The average fixed application fee for a fixed rate mortgage has soared from 334 in February 2004 to 611 in February 2007.

Find.co.uks analysis of mortgage data from independent financial product research firm Defaqto, shows that in 2004 fixed application fees ranged from 149 (Darlington), to 2,500 (Bank of Scotland Mortgages Direct).

In March 2007 the disparity is even greater. The lowest fixed application fee of 49 is being charged by Halifax for two-year fixed rate at 6.69%.

The highest fixed application fee of 2,499 is levied by Bank of Scotland on its two-year fixed rates at 5.49% and 5.60%.

The fee applicable to a large loan could easily exceed these maxima where the fees are charged as a percentage of the overall advance.

For example, Northern Rocks two-year flexi, fixed rate mortgage at 3.99% looks extremely competitive, but it comes with an application fee of 3.5% of the loan, so an advance of 300,000 would cost the borrower a massive 10,500.

And remember that if you have the fee added on to the value of your loan, youll also be paying interest on it.

David Black, head of banking at Defaqto, says: Consumers need to not only take account of the headline mortgage rate, but also the application fee at the outset.

If you have a small mortgage, the application fee will effectively boost the true cost quite considerably, whereas if you have a large mortgage, a fixed application fee is potentially a lot less.

Also beware that lenders can manipulate their positions in best buy tables. These tables are generally based on mortgage interest rates only.

So by increasing application fees and not the interest rates, lenders effectively increase the true cost of the mortgage.

Kate Marsden, marketing director of find.co.uk, says: Borrowers need to do their sums to calculate the total cost of a mortgage, including all fees, so they can compare like with like when assessing different deals.

After all, that upfront mortgage application fee could be a redecorating fund!

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