The latest data from Moneyfacts has revealed that arrangement fee-free mortgages now represent 40% of the mortgage market after growning steadily over the past two years.
According to the figures the popular products have increased from 1,270 - 33% of the market - in July 2016 to 1,709 (36%) in July 2017 and 2,007 today.
However, Moneyfacts has noted that when choosing a fee-free deal, borrowers may be missing out on offers that could be more cost-effective in the long run.
For example, borrowers opting for the lowest two-year fixed rate deal at 75% loan-to-value would be £1,131.80 worse off compared to someone opting for the lowest deal without a fee.
Charlotte Nelson of Moneyfacts, had this to say: “The fact that the number of fee-free deals has increased by 274 since the start of the year is great news for borrowers looking to keep costs down.
With 40% of the mortgage market now fee-free, it is clear to see that lenders are still trying to compete but in ways beyond the headline rate. Providers have opted to keep rates relatively static, choosing to wait and see if a base rate rise will come to fruition. By reducing some of their fees to zero, providers are able to remain competitive among their rivals.
However, as the number of fee-free deals has increased, so too has the average fee, rising from £979 in May to £990 today. Providers have always used fees to compensate for a lower rate so, borrowers now must become wise to this tactic, particularly with more no-fee deals on the market.
Ignoring the fee-free options on the market can be a costly mistake as fees can mount up, particularly if you remortgage multiple times over the lifetime of your mortgage. While many products allow you to add the fees to the deal, borrowers would then end up paying more in the long-run. That said, a fee-free deal does not mean borrowers will have no fees whatsoever to pay, as there are other costs such as valuation and legal fees to keep in mind.
Getting a mortgage is daunting enough without having to work through the maze of fees. However, it is important that borrowers research thoroughly, comparing the true cost of any deal, so they can be sure to get the most cost-effective option for them.”