Building Society mortgage `arrngement fees`

Snow_Dog

Oh, I think I see horaces point now. It all becomes clear.

Because the BS used the word ARRANGEMENT in their offer wrt the fee then he thinks its illegal.

Matey, you're pushing the boundaries of reality a bit there, accept it, the BS's are businesses just like Sainsburys and Tescos. They will charge as much as they think they can to get your custom and its up to you to shop around for the best deal, not bleat on about how you think its illegal.

And as far as I an concerned bank charges are fine, if you go overdrawn without authorisation you have stolen the banks money, you didn't ask them if you could take it, you weren't clever enough to track your spending, why shouldn't they be able to penalise you. The biggest losers in that fiasco will be everybody else who will now end up getting less interest and possibly the end of free banking in the UK for people who can manage their money enough to stay in the black.

1jim

horace wrote:

with due respect I feel that it does nothing to invalidate my argument.

horace

I think that this is pretty much the point.....I dont think that you will ever come to accept that your argument is flawed.

It seems to me that the majority of people replying to your posts understand what these charges are and accept them and are in no way confused with the various options, indeed its pretty simple
1) NO or LOW fee = Higher Rate
2) Higher fee = Lower rate
this allows the borrower to decide which deal is best for them, if you remain confused about this you need the advice of a very patient mortgage adviser (and good luck to them is all I can say )

You seem to be the only one that feels that these charges are illegal and I really cant be bothered to debate this again other than to say if you feel this stronly please feel free to report them to Trading Standards, the Office of Fair Trading or simply challenge them in court yourself but please please please let us know how you get on with that

Jim

Gorgeous_George

High arrangement fees should be illegal IMO. Arranging a mortgage must cost similar amounts across all mortgage products.

Takimg it to extremes, it's like Ford selling a new car for £50 but charging a £10K arrangement fee.

Designed to confuse and make comprisons more difficult. I'm comfortable with the maths but many people just see the headline rate.

I still think an NVQ in financial management should be mandatory for anyone taking a loan or mortgage.



GG

Snow_Dog

Why should high arrangement fees be illegal, its just the way mortgages are sold. Of course it costs roughly the same to lend £100,000 at 5% or 5.5%.

But the money the lender makes is different, its lower on the 5%, so thats why the fee is higher.

If you look at how cars are sold it certainly isn't transparent sometimes if there is credit involved. I have looked round garages before thinking how most of the motors are priced ott, then looked at the very easy credit terms and massive signs up promoting the low interest on the finance loans.

Surely this is the same thing, they are offering you a lower interest rate but you end up paying more for the car in the first place, only, unlike the building societies they aren't so well regulated and they can and do try to stitch you up.

£999 fee at 5%
£0 fee at 5.5%

Rocket science it is not. Anybody who thinks so should be using a mortgage broker.

Paul_V_3

Perhaps what is worrying is the apparent rate of change of these 'fees'.
How do they compare with 3-5 years ago?

I know that companies need to make their profit, but it does seem to me that we are getting a worse deal now.

Gorgeous_George

Perhaps they should be called something other than 'Arrangement Fee'.

They clearly are not fees to arrange the mortgage.

Perhaps 'Low Interest Access Rate' would be better. LIAR would be a great acronym! Although the name doesn't really work.



GG

dunstonh

Arranging a mortgage must cost similar amounts across all mortgage products.

No. Fixed rate mortgages in particular require the banks to book and arrange the money on the money markets and that involves costs which are higher than variable rate mortgages.

I know that companies need to make their profit, but it does seem to me that we are getting a worse deal now.

The deals are much more favourable when interest rates are expected to fall in the future. When interest rates are expected to rise the deals become less favourable. The terms, such as arrangement fees havent changed much with some lower, some higher but averages about the same in real terms.

Deals will also be influenced by the levels of bad debts. After the last property price crash, the banks lost billions and it takes a number of years for these to be priced out of the system. Bad debts are on the increase again. Not enough to drive commercial decisions by much but its heading that way.

Another issue is that savings accounts no longer subsidise lending as much as they used to. Savers want higher rates and margins there are lower and in many cases not enough to meet the mortgage rates. They are more likely to borrow and invest by other means rather than use one to offset the other.

Gorgeous_George

dunstonh wrote:

No. Fixed rate mortgages in particular require the banks to book and arrange the money on the money markets and that involves costs which are higher than variable rate mortgages.

Fair point but surely the banks book and arrange millions of pounds at a time. How much would it cost to book and arrange say 100 milliion pounds at a fixed rate? Then divide this by 1000 mortgages at 100K. Would it really cost a million pounds i.e, 999 pounds per mortgage (pound symbol not working tonight).



GG

regularsaver1

Didn't the FSA determine such phrases such as "Arrangement fee" and "Early Repayment Charge" (instead of penalty) from M day

These wordings appear on the key facts illustrations and offers . They don't like you using other phrases

dunstonh

Fair point but surely the banks book and arrange millions of pounds at a time. How much would it cost to book and arrange say 100 milliion pounds at a fixed rate?

oh around £499 per mortgage

The money is often arranged in bulk but does involve risk as well. That risk needs to be costed into it. Profit needs to be costed into it as well.

Another factor is that remortgaging between providers helped bring costs down but its now a factor that stops the charges going down further. Often, the margins may not be far off the arrangement fee and redemptions as a high proportion keep switching their mortgage.