Although much publicity has been given to the effect that higher interest rates on mortgages will have for homeowners this is not the only area of rising demand that these consumers will face, it has been claimed.
In a study carried out by uSwitch, it was revealed that some 38 per cent of homeowning Britons - about eight million people - have chosen to spread arrangement fees across the term of their mortgage repayments. And although not having to meet the full cost of arrangement fees after first securing a mortgage may seem to save consumers from needing to come up with more money early on in their period of homeownership, it was revealed doing so will place them under more financial pressure.
At present the typical set-up expense for a mortgage stands at 986 pounds. However, by adding this charge to a 25-year mortgage, uSwitch showed that costs would rise to 2,094 pounds. Such a figure amounts to an increase of 112 per cent from the original fee. For those opting for a mortgage which charges the highest fees (4,094 pounds), meanwhile, costs over a 25-year period would rise to a "staggering" 8,692 pounds. This, it was revealed, would add about 30 pounds on to consumers' monthly repayments.
Following on from facing higher mortgage fees, it may be possible that consumers develop difficulties in managing other demands on their spending. Such areas could well include personal loans, credit and store cards, council tax payments and utility bills.
Commenting on the figures, Ann Robinson, director of consumer policy for uSwitch, said: "This is a real catch-22 for consumers who are struggling to find the funds to pay mortgage set-up costs. In fact, by allowing consumers to add fees on to the mortgage, it could be argued that providers are doing them a good turn.
This is particularly true for first-time buyers where it could mean the difference between getting on the property ladder or not. However, adding fees to a mortgage means that you will be spreading the amount over many years and paying interest for the pleasure of doing so - this is an extremely expensive option and should always be seen as a last resort."
It was also pointed out that many homeowners could already be set to face a rise in mortgage costs as they come to the end of their fixed-rate deals. The price comparison website stated around 1.4 million homeowners are set to see their mortgage deals expire over the course of this year and that those who are unable to secure a similarly-priced product will see their monthly repayments "increase considerably". Ms Robinson added: "Piling on almost another 30 pounds a month for arrangement fees is just adding insult to injury."
Furthermore, exit fees were shown to be another area of constrain for homeowners. At present the typical charge for switching to another mortgage supplier stands at 163 pounds, although this can be as high as 295 pounds.
In an attempt to lower strains on their money management, uSwitch advised consumers to attempt to make overpayments on their mortgage. By doing so, it was claimed that homeowners could "significantly reduce" the length of mortgage repayments and negate the impact of adding arrangement fees.
Looking beyond the headline rates advertised on lending and getting a key facts illustration to provide an individualised quote should help lenders determine exactly how much they will have to pay.
Homeowners worried about the various pressures that their finances are under might wish to consider taking out a loan. By using such a low-rate loan as a means of debt consolidation, borrowers may find that they are able to pay for numerous property-related expenses such as arrangement fees and mortgage repayments quickly, leaving them with a single affordable monthly repayment.
Getting a debt consolidation loan might also assist consumers to meet spending commitments such as household bills and credit cards. Doing so could be of particular help to a significant number of Britons after a recent Equifax study showed that 41 per cent of people with a fixed-rate mortgage will see their deal expire over the course of this year.
Out of such consumers it was indicated that about two-thirds are yet to look for a new deal, a figure suggested to be one "of concern" as numerous lenders withdraw their cheap products. In addition, 59 per cent of people were indicated as being at least 5,000 pounds in debt.
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