A mortgage product fee is a charge a lender applies for the specific mortgage deal you take, sometimes called an arrangement fee, booking fee or completion fee. It is separate from valuation and legal costs and relates purely to the product itself. Lenders often offer the same underlying deal in two versions, one with a product fee and a lower interest rate and one fee-free with a slightly higher rate.
You can usually either pay the mortgage product fee up front on completion or add it to the loan, in which case you pay interest on it for the remaining term. Because the fee is fixed in pounds while the interest saving depends on the balance, the fee-paying option tends to suit larger loans and the fee-free option smaller ones. Comparing the total cost over the initial deal period, rather than the headline rate alone, is the reliable way to judge which version works out cheaper for your circumstances.