Building Society mortgage `arrngement fees`

dwsjarcmcd

There's fairness and stupidity, this thread displays that people are increasingly wanting something for nothing and seem to feel that any fee is illegal, which is clearly ridiculous. It's like someone joining a gym and trying to reclaim their joining fee!!

Point of detail, building societies don't have shareholders anyway

toonfish

dwsjarcmcd wrote:

There's fairness and stupidity, this thread displays that people are increasingly wanting something for nothing and seem to feel that any fee is illegal, which is clearly ridiculous. It's like someone joining a gym and trying to reclaim their joining fee!!

Point of detail, building societies don't have shareholders anyway

this is spot on, folk want the best of everything, for free. Get yourselves into the real world.

Kuztardd

since ive only come to this forum recently, i dont know how long people have been mentioning about the illegality of these fees.. but could it be since Martin lewis has been mentioning about the illegality of overdrafts and bank charges that people think that mortgage fees are also illegal?
just a thought?

dwsjarcmcd

Kuztardd wrote:

since ive only come to this forum recently, i dont know how long people have been mentioning about the illegality of these fees.. but could it be since Martin lewis has been mentioning about the illegality of overdrafts and bank charges that people think that mortgage fees are also illegal?
just a thought?

The fees there are lots of fees involved with mortgages, the ones that the OP mentions are arrangement fees, which are explicit within the deal i.e. a rate of x% with a fee of £500. Lenders also offer deals where the rate is higher than x but with a lesser, or no fee. These are absolutely clear and absolutely not illegal.

There are other fees such as exit fees, which are much more debateable because lenders can vary these after the contract has started. These are the fees that many feel more aggrieved about. Some feel that redemption fees are questionable, however, as these as again within the T & C's, they are more difficult to challenge.

The vast majority of fees are clear and part of the pricing of the mortgage deal and perfectly legitimate. If people don't want to pay the fees, take a deal that doesn't have any, but you will pay a higher rate.

dunstonh

Kuztardd wrote:

since ive only come to this forum recently, i dont know how long people have been mentioning about the illegality of these fees.. but could it be since Martin lewis has been mentioning about the illegality of overdrafts and bank charges that people think that mortgage fees are also illegal?
just a thought?

That is almost certainly the reason they think like that but the reasoning behind it is daft.

Charges are not illegal. It is how they are presented and disclosed that is. With overdraft charges, it wouldnt surprise me if the banks come up with some alternative that is legal. This could easily effect the majority who never go overdrawn as it could see the re-introduction of monthly fees for all. Or it will see a tightening up of lending on current accounts and quicker disposal to debt collection companies. Claiming these bank charges will have consequences and the consequences will probably be harder on those that do not steal from the bank (which is what an unauthorised overdraft is) than those that do. Anyway, that is for another thread in another section.

Next people will go into Tesco and refuse to pay for the food because they think Tesco's fees are illegal as they are implicit and not explicit and not disclosed.

jollyanna

Kuztardd wrote:

since ive only come to this forum recently, i dont know how long people have been mentioning about the illegality of these fees.. but could it be since Martin lewis has been mentioning about the illegality of overdrafts and bank charges that people think that mortgage fees are also illegal?
just a thought?

Kuztardd's post rang a bell with me as yesterday I was sifting through household files and read the details on our Homebuyer Protection Plan. I was staggered to read that we paid a commision to our bank for arranging the policy, of over £900, and then £1.04 from month 49 for the rest of the term ! If I need to arrange such cover/plan again, I will know to do my own research and take time to shop around and read all the smallprint. This is all thanks to Martin and this site for giving me a wake-up call.

jamesd

horce, lets see:

You walk into a supermarket, walk out without paying the price for the goods, get arrested. You complain that it's not fair to charge for a purchase, magistrate laughs and you go to community service.

You walk into a bank, pay the arrangement fee to buy the mortgage, then complain that the bank ripped you off and you shouldn't have had to pay for what you bought.

Either way, you're expecting something for nothing. The company selling the product is entitled to charge you for it.

What they can't do is have unfair penalty clauses in the contract for you breaching the contract. The price agreed up-front isn't a penalty clause any more than the price of a supermarket item is.

jamesd

dunstonh, A&L are trying. They have introduced a current account with lower interest but also lower charges for breaches.

I don't think that this was a wise move on their part, since it (correctly, I think) implies that the charges on the other accounts are subsidising the interest rate and that helps the argument that they are really an unfair penalty clause.

horace_2

>> janesd

Your post #26 refers. I agree with your points in that post but, with due respect I feel that it does nothing to invalidate my argument.

I will give you another example.

Mr Punter goes to his local Building Society to buy a mortgage.
The mortgage advisor explains that he can have a reduced mortgage rate of £xyz but if he opts for this there will be a one off, non returnable up front fee of £499.

That in my opinion is as clear as day and it would be very difficult for anyone not to understand.

However IF,
Mr Punter goes to his local Building Society to buy a mortgage.
The mortgage advisor explains that he can have a reduced mortgage rate of £xyz but if he opts for this there will be an ARRANGEMENT FEE of £499.

The term "Arrangement Fee" implies, I think, that the B/S is going to perform a task over and above what they do for other customers for the benefit of Mr Punter. The sad fact is the B/S are doing no such thing.
As a poster earlier in this thread said the fee is there to make the profit model work better.
If, that is the case the use of the term "Arrangement Fee" is grossly misleading.

Interestingly, dunstonh, in post #26 said this

`Charges are not illegal. It is how they are presented and disclosed that is.`

horace

MarkyMarkD

Horace

You are arguing about semantics.

It doesn't matter what the up-front fee is called as long as it's disclosed.

And the Key Fact Illustrations which all lenders have to product have to show these fees. There's no scope for confusion.

Just to reiterate - it doesn't matter what the fee is called, or what it's for. It's there as part of the pricing of the loan.

In fact, I have a 100% opposite to your view about the naming of the fee in any case. "Arrangement fee" is very obviously a fee for setting up a loan. There are clearly costs involved in doing so - paying the sales staff, or the mortgage adviser if you purchase it through an adviser, paying the processing staff, pushing bits of paper around - and charging an up-front fee to cover these up-front costs (and an element of profit) is completely fair.

Lenders are not operating charities - they are in the lending business to make money. It's completely irrelevant whether they do this through an interest rate margin or through an up-front fee.

Indeed, to go further than that, it's completely irrelevant whether they do this through an interest rate margin, an up-front fee, or an end of mortgage fee which is fairly disclosed up-front.