Mortgages make lenders thousands of pounds in interest, so why do we have to pay a fee for the privilege of taking one out and why are these rising?
Not only are these fees another way to take money from customers, they also make a huge difference to the overall cost of a loan, adding more than 0.5% to the rates of some mortgages.
And on top of arrangement fees, some mortgage providers are also charging application fees.
"Nationwide recently joined a growing band of lenders charging borrowers an upfront fee in order to secure a product," said Moneysupermarket mortgage head Louise Cuming.
"The building society obviously wants some commitment that borrowers will see the application through to completion. If borrowers have to pay up front, they are less likely to drop out part way through the process."
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How do fees impact on overall value?
Of course, it can be worth paying a high arrangement fee to secure a low interest rate. Anyone with a large mortgage balance, for example, will benefit more from a low pay rate than they would from a deal with a one-off arrangement fee that is a few hundred pounds lower.
Alternatively, someone who is close to paying off their home loan may well be better off looking for a deal with a slightly higher interest rate and lower charges.
For example, First Direct's two-year fix costs 3.34% a year and carries a £999. HSBC's two-year deal costs 0.65% more at 3.99% but comes with a £499 arrangement fee.
For someone looking to borrow £100,000, the HSBC deal with a higher rate works out at £135 cheaper over two years thanks to the £500 difference in fees. However, borrowers looking for a £130,000 mortgage would pay £24 more for the HSBC deal than they would with First Direct.
And as the loan amount rises, so does the difference in costs. If you're borrowing £250,000, you would pay over £1,000 more with HSBC than with First Direct over the two-year term of the deals.
"It is vital to take both fees and interest rate into account when choosing a deal," said Moneysupermarket's Cuming.
Speak to a mortgage adviser about your options
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Other than the deals outlined above, Chorley Building Society is currently marketing a one-year fix with a rate of 3.25% and a maximum loan to value ratio of 75%.
However, larger borrowers should be aware that the deal carries a potentially punishing arrangement fee of 0.75% of the loan amount.
When it comes to tracker rates, the Co-operative Bank is leading the field with a three-year deal currently at 2.39%. The arrangement fee is £995.
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