Smaller mortgage deposit means higher fees

With property prices in the UK soaring, many first time buyers that do not have the equity from a previous property to fall back on are really struggling to raise a decent deposit for a home, with some unable to raise any deposit at all and having to rely on a 100% mortgage.

Also, to make matters worse for these first time buyers many banks and building societies are penalising them for being unable to raise a large enough deposit by applying huge mortgage fees to their loans.

According to recent reports, some of the UK's major lenders are making first time buyers pay an average mortgage fee of around two thousand pounds if they are not able to raise at least ten percent of the loan amount by way of a deposit. And with house prices currently sky high in the UK, trying to raise ten percent is simply unachievable for those with no previous property and no savings.

It is thought that over 100,000 people will be affected by these mortgage fees, which are known as higher lending charges, and that the various banks and building societies will net an additional £220 million this year alone as a result of these charges. Amongst the lenders that are applying the fees are the Alliance and Leicester and the Halifax. According to the lenders the fees are charged by way of protecting themselves against the increased risk of lending to those with minimal or no deposits.

One Moneyfacts spokesperson stated: 'When you look at the amount, I think it is a way of boosting profits.'

Another added: 'With first-time buyers paying an average of £145,000 on their property, they could end up spending £5,500 on higher lending charges and stamp duty alone.'

Tom Smith
14th May 2007

 

More Information:

• Choosing The Right Mortgage
  The market is flooded with different types of mortgages, but how do you know which one is right for you? The decision has to be yours, whether you take advice from an Independent Financial Advisor or do your own research.
• Don’t Forget The Extra Hidden Costs Of Getting A UK Mortgage
  For most of us, buying a new home is both one of the most exciting and stressful times of our lives. It goes without saying then that this is not a particularly good time to find out that you may be facing a bill of thousands of pounds in extra hidden costs for getting the mortgage to buy the UK property.
• Can You Rely On Your Family To Help You Buy Your First Home?
  At no time in its history has the UK housing market since such a marked increase in the average value of its housing than in the last 20 years. Today, regardless of whether you come from the North-east or South-east, more and more young Britons are having to stay at home much longer and also to look more ingenious ways to try and raise the large deposits they’ll need in order to help them purchase that first home. The big question is, can you rely on your family to help you buy your first home?