First-time buyer mortgage fees up 35%

The average fee paid by a first-time buyer to secure a mortgage in the UK market has increased dramatically over the past year.

When the top five products available to this group are considered, the average fee attached to a new deal has increased by some 35 per cent since March 2007.

This means a first-time buyer who a year ago would have paid £637 in fees for a mortgage will now have seen this increase to £857.

These figures are a result of research conducted by mortgage service provider mform.co.uk, which also finds interest rates have been increasing, despite cuts from the Bank of England to the base rate.

In March 2007 the average interest rate on the top five first-time buyer mortgages was five per cent, which has subsequently increased to 5.8 per cent at the same point this year.

Mform estimates this means the average first-time buyer will see their annual mortgage repayments increase by around 16 per cent or £920.

This is despite cuts by the Bank's monetary policy committee in interest rates, bringing the bare rate down to 5.25 per cent.

"These are tough times for first-time buyers," said Francis Ghiloni, mform's marketing and business development director.

"Lenders are generally asking for larger deposits and with fees and interest rates on the up, borrowers will need to be sure about their ability to meet these commitments before taking a step on to the property ladder.

"Potential borrowers need to be careful now more than ever to take into account the impact of fees on their mortgage in order to make sure that they have a clear idea of the true cost of their mortgage."

While many of the big name lenders demand increasingly large deposits, mform's analysis reveals the current best buys for first time buyers include tracker deals from HSBC that offer up to 90 per cent of the properties value.

Fixed-rate deals from Yorkshire Building Society at up to 95 per cent are also attracting interest.

Buyers looking for the security of longer term fixed rates will find a competitive five-year fixed-rate at 5.59 per cent from Abbey which requires only a 20 per cent deposit.