MSE News: Mortgage fees soar amid record low rate environment

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This is the discussion thread for the following MSE News Story:

"Mortgages arrangement fees have jumped by a typical £150 in 12 months, so borrowers should be on their guard ..."

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  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    As a rough rule of thumb for comparrisons, I divide the fee by the mortgage amount (and multiply by 100) to get the fee as a percentage of the loan. [Obviously where the fee is a percentage, you don't need to bother with this bit!]

    Then divide this percentage by the number of years you are tied in for (generally the same as the fixed period, etc) or expect to have the loan for and add it to the mortgage rate.

    E.g. if you're paying 2% of your mortgage in fees for a 4 year deal, that's like an extra 0.5% on your interest rate.
  • Credit-Crunched
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    Doesn't the APR include all associated costs and charges to allow a direct and accurate comparison of rates?
  • nomoneytoday
    nomoneytoday Posts: 4,866 Forumite
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    All these bank refunds for PPI and overdraft costs have to come from somewhere...
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    Doesn't the APR include all associated costs and charges to allow a direct and accurate comparison of rates?
    Yes they do. And for a personal loan, for example, that would be completely the right thing to do.

    But with a mortgage, the typical term is 25 years. Lets say you pay a fee to go onto a fixed rate for 4 years and then revert to the standard variable rate after that. Because you'll be on the standard variable rate for 21 years, that rate has a much bigger bearing on the APR than the fixed rate and fees. Where in reality you would probably move onto another product after the 4 years.
    So for mortgages, the APR is based mainly on something that for many has no relevance.
  • michaels
    michaels Posts: 28,074 Forumite
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    Michelle Slade, from Moneyfacts, says: "Unfortunately, too many borrowers still focus their initial attention on getting the best rate, without taking full consideration of the true cost of the deal.

    Really - where are these gullible people who don't bother to do even the most basic calculations on what things cost even when the difference can be several thousand pounds, I am sure I could sell something to them...may be an iphone ;)
    I think....
  • trulysaintly
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    an independent adviser would do these calculations for you..

    Forget comparison websites & best buy tables, which are merely ad sites - lots of fantastic deals that are on offer are rarely included because the lender won't pay to take part.
    :A Born a Saint, always a Saint!
    I am a Mortgage Adviser


    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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