Mortgage setup fees

rosiejb10

I'm visiting my bank this week to arrange a new mortgage deal. It will be between a tracker & a 5 year fixed rate. But, it costs £400 to set up a tracker & £900 to set up a fixed rate. Can anyone explain to me why there is such a difference in the work involved by the bank to justify a huge difference in the cost. Would it be worth me arguing with the bank about the costs. Do they ever make deals? Thanks.

happybroker

There is a difference in the way that fixed rates and trackers are funded and I doubt very much that they will ammend the fee for you I'm afraid.

Once you have the full details of the rates available it would be a good idea to sit down and do your research to ensure you are getting the best deal available to you, you could find a good whole of market broker also who would be able to go through in detail what is out there and also give you a formal recommendation as to the best course of action which I doubt you will get in the bank as it will more than likely be a "non advised" sale.......watch out for the phrase "to help you make an informed decision".

Conrad

Fixed rate fubnding is more complex and involves more risk for the lender, hence the higher fee, and no of course they don't operate on a haggle system as this would cause unfairness in the system and immensely complex back office procedures / ammendments to software etc etc etc

dunstonh

expanding a little more on the above, fixed interest deals are usually funded by investors, not savers (as Conrad says its complicated so the term investors keeps it simple). So, you have costs involved as well as guarantees to the investors. Also, with some fixed rate deals, the profit margins are transferred from the interest rate to the fee (or vice versa). This often happens when the lender is targetting certain types of mortgages. e.g. larger mortgages tend to benefit from higher fees, lower rates. Smaller mortgages tend to be the other way round. A lender may not be interested in smaller mortgages and only offer deals that appear attractive to the larger mortgages and unattractive to smaller borrowers.

Whilst justification has little to do with retail pricing, if they did have to worry about that then they would have a harder job justifying £400 for a tracker than £900 for a fixed rate.

_Andy_

rosiejb10 wrote: »

Would it be worth me arguing with the bank about the costs. .

No, it wouldn't.