Homebuyers warned not to forget valuation fees

Homebuyers must think about the cost of their valuation fees - a fee that is often forgotten amongst other home buying costs - when choosing a mortgage, according to Moneyfacts.co.uk.

Julia Harris, mortgage analyst at Moneyfacts.co.uk, says: "As we move away from a totally rate driven mortgage market, much focus has been placed on total cost, inclusive of rising arrangement and exit fees.
"But one fee, which perhaps we view as a service charge, has slipped through the net - the valuation fee."
Harris says that most first time buyers struggle to afford their start-up costs and lenders try to entice them with fee-free deals, which often leads to higher rates. Those providers offering free valuation fees are often only providing basic valuations, something the lender requires to ensure they do not lend more than the property is worth, which means the homebuyer foots the bill while their lender benefits.

Moneyfacts.co.uk research has shown the huge differences in valuation fees charged by lenders.
Among the top lenders such as Northern Rock, Barclays, Abbey and Mortgage Express, the difference in costs for a basic valuation is £360 and up to £345 for a homebuyer valuation, based on a £200,000 mortgage.
Harris adds: "Earlier this year it was reported that the Financial Services Authority may consider a review of valuation fees. This becomes even more pertinent with the rising number of mortgage cases valued by means of an Automatic Valuation Model."

The Council of Mortgage Lenders has predicted that a third of purchase cases will use AVMs by 2011.
The AVM is a much cheaper way of valuing a property and Moneyfacts.co.uk believes these savings should be passed on to consumers.