Mortgage Arrangement Fees

Carnwaj

Hi all,

My current deal with the Abbey is coming to an end. I was thinking that I would just take out another mortgage with them. However all the new deals they offer have an arrangement fee of £1000 (ish). This seems like money for old rope. I've been with them forever and never missed a payment.

What do they do for the £1000?

Anybody had any luck arguing that the fee isn't justifiable?

dunstonh

This seems like money for old rope.

its not.

What do they do for the £1000?

arrange the financing to cover the fixed rate. There is also an element of product pricing in the charge as well. By charging a higher arrangement fee, they can lower the interest rate (or vice versa in low fee versions).

Anybody had any luck arguing that the fee isn't justifiable?

Nope. If you go to Currys and buy a TV, do you complain that you have to pay for a new one as you bought a TV from them 5 years ago?

opinions4u

Carnwaj wrote: »

My current deal with the Abbey is coming to an end. I was thinking that I would just take out another mortgage with them. However all the new deals they offer have an arrangement fee of £1000 (ish). This seems like money for old rope.

It's part of the overall price of your mortgage deal.

Low fee usually means higher rate.
High fee usually means lower rate.

Looking at Abbey's 2 year fixes on their web site, they have the following remortgage choice:

3.78% with £995 fee
4.39% with no fee

The fee buys you a cheaper rate than is available on a fee-free product that also fixes for the same period.

I've been with them forever and never missed a payment.

And they are offering you an alternative to their SVR. They are not obliged to do so.

What do they do for the £1000?

The send it to Spain and spend it on a very impressive head office building (or rather it is part of the profit they make from mortgage lending - if they didn't charge the fee they'd charge you a higher rate. It's swings and roundabouts).

Anybody had any luck arguing that the fee isn't justifiable?

It's a fee for the specific product you choose. Not a fee for the paperwork they do. As such, it's not up for negotiation.

Firewallrob

Often people choose to add the fee to their mortgages, and take a new deal every couple of years. Imagine the charge over the mortgage term !!

Also - it's all very well adding 1K to a mortgage with 25 years /23/21/19 to go, but what about 9/7/5/3 ....

Sometimes people add the fee, and take a new deal - they say "my payments are lower, even when I add the fee - compared with not taking the new rate".

BUT...what you MUST look at is the fact that at the end of the two year deal, your balance will be higher than before (depending on the term remaining / repayment method).

Sometimes it's still worth doing - But you must compare the whole situation.

Leon_W

Opinions

I think Santander will need a fair few thousands to continue the sponsorship deal with the Mercedes F1 team if they get Schumacher to drive !

While I'm on the subject, did you see that Lloyds had bought a stake in Manor F1 for over £10 mill ? !!!!!! is that all about ? As a taxpayer I wonder if they'll let me have a drive or at least get to go on a company jolly. It's outrageous !

http://www.usatoday.com/sports/motor/2009-12-14-3882699551_x.htm

Regards

opinions4u

Leon_W wrote: »

Opinions

I think Santander will need a fair few thousands to continue the sponsorship deal with the Mercedes F1 team if they get Schumacher to drive !

While I'm on the subject, did you see that Lloyds had bought a stake in Manor F1 for over £10 mill ? !!!!!! is that all about ? As a taxpayer I wonder if they'll let me have a drive or at least get to go on a company jolly. It's outrageous !

Should they not be looking to make profits with which to be repaying the taxpayer?

Carnwaj

Thanks for all your feedback. Much appreciated.

Nope. If you go to Currys and buy a TV, do you complain that you have to pay for a new one as you bought a TV from them 5 years ago?

When I go to Curry's for my new tv I absolutely try to negotiate. It is just another product. Mortgages are another product like any other. But unlike other products there isn't room to negotiate.

Not sure I like the idea that an Arrangement fee is just a way of reducing interest. Why not call it that if that's what it is?

dunstonh

Not sure I like the idea that an Arrangement fee is just a way of reducing interest. Why not call it that if that's what it is?

True you could split it, create a new charge and call it something different but wouldnt that just complicate things?

Remember that some benefit by having a high fee/low rate and some vice versa. A high fee doesnt mean its bad. It can be very good for some.

potnoodle_2

i just came off svr with abbey and onto one of their fixed because they sent out a flyer offering me 5 years at 4.79 with no fees, there were quite a few other good offers free free, ask them why you dont qualifiy for these.

joolley

Ask.

I'm in the process of porting my mortgage to my new house. Of course, porting is a new mortgage application, leading to a new fee. My bank is very very strict with lending at the moment and is one of the 2 big high street lenders that has made a profit this quarter and the last.

I asked for the £995 fee to be waived. They did. I am moving to a house valued just £10K more than my current house, mortgage is largely the same, I overpay by £450 a month and I'm considered a safe bet. If you're as safe as you suggest, they may consider it.

joolley