Changing Mortgages, Arrangement Fee?

Chell

At the moment we have a mortgage with Abbey which tracks the base rate of interest. In July this period ends and it will change to Abbeys standard rate.

I visited a mortgage advisor who recommended that we have a fixed rate mortgage with Halifax. The arrangement fee is approx £600. Is it possible to get a good deal but not pay such a high arrangement fee?

HelpWhereIcan

The quick answer is yes, maybe, well erm it depends.

The reason is that the amount you are looking for will largely dictate the answer.

If you take a loan amount of £100,000, a £600 fee on a 2 year deal is the equivalent of an extra 0.3% on your interest rate. So a fixed rate of 5%without a fee would be 'better' than a fixed rate of 4.8% with the fee.

However, on a loan of £200,000, it is only equivalent to an 0.15% interest per year, so using the deals above, you would be better off taking the lower rate and paying the fee.

Basically, all depends on your loan amount etc and this is why I always try to help my customers look at it in terms of 'cost over a period' (which includes all fees as well as interest) rather than the lowest interest rate. After all, the lender is counting on you being attracted by the lowest rate so they can earn more in fees.

It may well be that your adviser has worked it out on total cost over a period rather than just looking at the rate. Post more about what you are looking for and been offered and someone may be able to comment further.

Hope this helps

Chell

Many thanks, there is £68,000 approx outstanding.

ellabee_2

Try Brittania, they have offers on at the mo...£99 fees, including solicitors and valuation costs. https://www.britannia.co.uk. Worth a look.

Ian_W

Have you also checked what Abbey will offer you as a retention rate? It will normally only go to standard rate if you do nothing, with such a relatively small mortgage you may be better staying put if the rate isn't too high. Abbey and Halifax only offer their best rates to new customers but do have retention rates [or at least did last time I had dealings] which are better than SVR.
By my reckoning £600 adds almost 0.9% to the rate on a £68K mortgage and there will be a fee to leave Abbey so unless you're going to get a rate that is around 1% better than than they offer you may be better staying put.
Do, however, check out the Britannia one above. From memory I think it's 4.55% [0.5] above BoE base rate for 2 yrs with no tie-ins. Your advisor wouldn't recommend it as Brit don't deal with Brokers.
BoL.

Chell

Thanks for all your help.

Ian, do I just phone them and ask them what rate we will get if we stay with them? Then ask them if they will reduce the rate to keep the business?

I have the info about Halifax from the mortage advisor here:

Amount of loan required £68,000 plus £599 fees added to the loan. I thought I told her we would pay this. Surely its stupid to pay interest on this for the 23 years remaining?

Valuation fee - payable upfront £300
Deeds despatch fee £50
Lender Conveyancing - £161.27 payable on completion.

I can't see if Abbey charge me for leaving.

So in total that is over £1000 to change. With Halifax the fixed rate is 4.56% making our payments £401.69, same as we are paying now with Abbey. In July our rate with Abbey will increase. After two years with Halifax it will increase to £473.65 if their variable rate is still 6.5%. So thats roughly £1500 over two years. I don't know what Abbeys base rate is now but if its 6.5% too then I am paying out £1000 to save £1500 over two years. That is providing I pay the fees upfront rather than pay interest on them for 23yrs.

I could find the £1000 but would rather spend it on something else.

Sorry for waffling, I am trying to get it clear in my head. Its all too easy to just believe what you are told by the mortage people and not actually understand what you are saving.

I'll phone Abbey and look at the Britannia site later.

Thanks again.

Chell

ellabee wrote:

Try Brittania, they have offers on at the mo...£99 fees, including solicitors and valuation costs. https://www.britannia.co.uk. Worth a look.

Many thanks, the payments are £4 less a month compared to Halifax and the fees are just £99 so I save over £1000.

I think I will cancel the mortgage advisor, speak to Abbey see if they can offer me a better deal then contact Britannia if they can't.

Ian_W

Hi chell,
Yep, just ring Abbey and explain you're looking to change lender and ask what the best rate they can offer to retain your business is and whether there are any fees to get it. You can then compare that with the Halifax rate of 4.56% + around £1500 fees [arr, valuation, legal + Abbey redemption fees] to see if it's worth switching or not. Also I agree adding fees to the loan is best avoided if you can afford them up front.

IMO it was remiss of the Broker not to tell you to check with Abbey for the best rate you could get and compare deals against that, rather than Abbey SVR - assuming they do still offer better retention rates than better SVR - it will only cost you a phone call to find out.

The Brit deal is good but bear in mind it's a 2yr Tracker like you're on now NOT Fixed. A lot of folks are suggesting IRs will go up before the end of the year but if you can afford to risk that, particularly with no high up front fees and no tie-in, it may be thre right one for you. If you're at the top end of your budget then fixed is probably better.

homer_j_3

chelltune wrote:

I have the info about Halifax from the mortage advisor here:

Amount of loan required £68,000 plus £599 fees added to the loan. I thought I told her we would pay this. Surely its stupid to pay interest on this for the 23 years remaining?

That is providing I pay the fees upfront rather than pay interest on them for 23yrs.

Generally speaking it is good advice to say add the fees on top purely for the "what if it doesnt go through" scenario. You will not have lost any money that way and providing you can overpay on the mortgage, you can repay these admin fees after completion.

Chell

I phoned the Abbey, the best they can offer is a flexible tracker at 4.99% with no tie in. There is a £500 booking fee on this though.

If we leave Abbey then we will need to pay £225 fee for coming out of our present mortgage. If we stay with our current Abbey mortgage the rate will go to 6.5%.

I really don't know what to do. We want to move in the near future but that depends on whether or not DP gets a payrise. I don't know if it makes more sense just to stay with Abbey and have a higher monthly payment and then re-assess the situation if we move or change the mortgage now.

Chell

If I change to a different company do they finalise things with Abbey or do I have to do that?