Mortage renewal and arrangement fee

diethyl_ether

I'm in the middle of trying to get a mortgage as a first-time buyer. My partner and I are borrowing £140,000 and so far the First Direct Base Rate Tracker of 1.89% + Base Rate seems the most attractive, as we have less than 65% LTV.

However, I'm concerned about the arrangement fee of £999. I know it's normal for there to be these fees, but from what I've seen, people seem to change mortgages when each one's term of, say, 3 years is up, because interest rates change.

After those 3 years, do you pay the arrangement fee again?
Even if you stay with the same company? Isn't it pointless, as the saving in payments you make is probably going to be less than £1k a year?

VIGILANT22

If after the 3 years you want a new deal and an arrangement fee is applicable yes you pay, regardless whether it is with existing or new lender.
If you dont like the fee, look for another deal, you'll probably find the interest rate slightly higher if arrangement fee lower....That's the way it is......

getmore4less

The fee free is 0.5% more so 1.5 year to make up the £1k cost on a £140k loan.


One of the reasons for getting a good base rate tracker is to never need to change mortgage product again, so no more fees.

Just make sure your full term is as long as possible, with this offset product unlimited overpayments.

Dom3663

If you decide not to go onto the lenders SVR, then yes you will need to pay another arrangement fee.
From my searching some offer low arrangement fees, but a slightly higher rate of interest. Ie For me Nationwide offer fixed 5.74% with £995 arrangement fee. Or fixed 5.94% with £395 arrangement fee I think. You need to work out the maths to work which would be the best for you in the long run...which you seem to have noticed as the payment saving might not be £1000 over the term.

I think its only because interest rates have dropped that arrangement fees have come more into force although I cannot confirm this

VIGILANT22

Their has always been arrangement fees around, however over the years they have increased.

getmore4less

Dom3663 wrote: »

If you decide not to go onto the lenders SVR, then yes you will need to pay another arrangement fee.
From my searching some offer low arrangement fees, but a slightly higher rate of interest. Ie For me Nationwide offer fixed 5.74% with £995 arrangement fee. Or fixed 5.94% with £395 arrangement fee I think. You need to work out the maths to work which would be the best for you in the long run...which you seem to have noticed as the payment saving might not be £1000 over the term.

I think its only because interest rates have dropped that arrangement fees have come more into force although I cannot confirm this

The OP is looking at a lifetime offset tracker from FD. so no need to worry about a SVR or fees if it stays competative, which is likely for some time at +1.89%

diethyl_ether

With this house-buying stuff, there are fees left, right and centre. This concept that every 3 years or so you are to renew your mortgage and perhaps shell out several hundred pounds to do so seriously adds onto the cost of the mortgage. This is not to mention life, sick pay, buildings and contents insurance (all of which add up to about £100 a month), plus the ridiculous fees for general bureaucracy between solicitor and estate agent. Buying a house is turning out to be an unpleasant experience.

Thanks all for your quick and informative responses. All signs seem to point towards this base tracker with First Direct. I'd applied for a lifetime tracker with Woolwich (2.43% above base), which meant I wouldn't need to go onto the SVR and theoretically could just stay on it for the whole 25 years, but they rejected me because I haven't been working for long enough.

The OP is looking at a lifetime offset tracker from FD. so no need to worry about a SVR or fees if it stays competative, which is likely for some time at +1.89%

But it isn't a lifetime offset tracker: firstdirect.com/1/2/mortgages/our-latest-mortgage-offers

The lifetime one is 2.79% above base. If the 1.89% + base was a lifetime tracker, that would be fantastic.

getmore4less

The FD offset trackers are lifetime, 4th one down.

base + 1.89% with the £999 fee for LV 65%

diethyl_ether

Yeah, you're right.

I called FD to check after I posted before. It seems pretty good then!

Thanks again for all your help.