30 Sep 2008

Homeowners looking to remortgage their property have been warned to look at the overall cost of the loan rather than just the interest rates.

The warning from Which? magazine comes after a survey it conducted found that 26 per cent of people chose their current loan by selecting the cheapest rate.

Conversely, just 20 per cent of people considered other items such as fees to get a complete picture of the deal.

Which? said that a more considered approach is currently required due to the fact that lenders have hiked charges on their offers with many now demanding four-figure sums.

Martyn Hocking, editor of Which? Money, commented: "The cost of mortgages has soared in the last couple of years, but a lot of the focus has been on what’s happening with interest rates when in fact it’s the total cost of the deal that's important.

"Arrangement fees are now more than £1,000 on average, and sometimes much higher, which means that an eye-catching interest rate can be misleading."

The study also discovered that 31 per cent of respondents have never switched lender when remortgaging their home.