In the last two years the average fee for arranging a mortgage has risen by 83% from £334 to £611 with some fees potentially over £5,000.

These fees can be paid at the start of the agreement but many people are unlikely to have an additional £5000 at the time of arranging a mortgage so the fee will be added to the total loan amount.

This means the fee will also be subject to interest over the term of the mortgage. £5,000 is one of the highest examples of rising mortgage fees but fees of around £2,500 are becoming common.

Fees are also set to rise in the second charge market as some secured lenders now allow brokers to charge a fee to customers with clean, healthy credit.

Adverse customers have historically paid fees to brokers because extra work is often required to arrange the loan.

People with clean credit are typically eiligible for more comeptitive rates of interest which means over the term of the loan the total amount on interest paid is less. This means less profit for the lender and less commission for the broker.

With fees now being introduced for arranging loans for ‘good credit’ customers, lenders are able to offer an even lower rate of interest because with the combined fee the total profit could be the same as it would be at a higher rate with no fee, thus making the loan appear more attractive.