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Headline grabbing deals conceal high fees

Mortgage lenders have increased their fees over recent months, with many borrowers now paying £1,000 or more in application fees.

In November, 11 lenders increased their fees by as much as £200, with experts blaming increasing administrative costs.

Since the Financial Services Authority (FSA) began regulating mortgages costs for lenders have increased. At the same time, many mortgage lenders are increasing fees as a way to maintain headline grapping low rates.

Ray Boulger of John Charcol explained that because of this, higher fees can be good for borrowers.

He told BBC Radio 4's Money Box: "A lot of lenders are offering a choice of fee and rate so you have the option of paying a higher fee to get a lower rate.

"It would be simpler if every lender offered one standard variable rate mortgage. But it wouldn't be good for customers. The greater choice the greater opportunity there is for customers," he added.

Scott Hanton, a mortgage analyst from Moneyfacts, agrees, telling Reuters: "To remain the 'top rate' provider, lenders often need to offer very low headline rates -- sometimes below the cost of funds."

For moving costs, click here to see how much you could borrow with Lombard Direct.

11/12/2006 10:22:52

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