Mortgage customers face hefty fees for rejected applications

04 November 2009 / by Rachael Stiles

Mortgage customers who apply for home loans could still face booking fees of up to £1,199 even if they are ultimately rejected for a mortgage, realpricecomparison.com has said.

Borrowers should watch out for non-refundable booking fees when they apply for a mortgage, the independent comparison website urges, as its analysis found that up to 19 per cent of all lenders currently charge from £100 to £999 on some of their mortgage products.

These non-refundable fees are apparently becoming more common as lenders implement them to cover the costs of processing applications and booking preferential rates, and an increasing number of borrowers are being affected since it has become more difficult to get approved for a mortgage.

Those prospective applicants who pull of out a mortgage deal will almost certainly have to pay the fee, realpricecomparison.com found, although some lenders said that they would not impose the fee if the application was rejected.

Fees range from £100 to £1,199, with the average fee at around £405, the website's research into the mortgage market found.

Reacting to the findings, Francis Ghiloni, commercial director at realpricecomparison.com, said: "The picture on fees is becoming more and more confused and the issue of non-refundable fees is not helping.

"Lenders will argue that they face costs in processing applications and if they reserve a product for a customer and that is fine as far as it goes. But if customers are turned down for a mortgage or are forced to pull out of a deal it will be an extremely unpleasant surprise to find that not getting the mortgage you wanted is going to cost you a lot of money."

Ms Ghiloni added that potential borrowers should make sure they are certain they want the mortgage and that they can afford it before they start the process; "otherwise they could end up incurring unnecessary costs," she said.

© Fair Investment Company Ltd