Mortgage Fees

brian_sp

Is it just me or can banks etc really justify their fees for setting up mortgages.Most are best part of £1000.Can this be justified or is it just a way of banks etc trying to build up their cash reserves ?

GMS

The fees can mean lower interest rates. Opt for a no fee product if you prefer.

Check if the arrangement fee will be saved by lower rates before doing anything

brian_sp

My daughter recently completed her first mortgage and took fixed rate at approx 6 % fee of £1000 after paying approx 15 % deposit .Bearing in mind BOE rate is 0.5 % does not seem a good deal to me.Was the best she could get however.

GMS

Base rate does not come into play for lenders raising funds. Nobody borrows at 0.5% not even the lenders

Sometimes fees are worth paying, sometimes there is no other option.

opinions4u

brian_sp wrote: »

My daughter recently completed her first mortgage and took fixed rate at approx 6 % fee of £1000 after paying approx 15 % deposit .Bearing in mind BOE rate is 0.5 % does not seem a good deal to me.Was the best she could get however.

A 5 year fixed rate savings account will typically pay 4.5% or more.

That's the cost of raising the funds. Not Bank of England base rate.

Historically lending margins have been around 2% ... so you'd expect to pay 6.5% to borrow that money on a mortgage.

Thrugelmir

brian_sp wrote: »

Is it just me or can banks etc really justify their fees for setting up mortgages.Most are best part of £1000.Can this be justified or is it just a way of banks etc trying to build up their cash reserves ?

Mortgage lending per se isn't particularly profitable at the current time. So high product fees are a way of discouraging applications from borrowers requiring small advances.

brian_sp

I have to agree that it may not be the most profitable part of their business when you consider rates of overdrafts, credit cards etc.However when you consider how many people have mortgages I can only assume they are still happy to provide the service and one way of making it more profitable is by charging very high arrangement fees.

brian_sp

GMS can you advise of the point of a base rate if no one is able to borrow at that rate?

_Andy_

brian_sp wrote: »

Is it just me or can banks etc really justify their fees for setting up mortgages.Most are best part of £1000.Can this be justified or is it just a way of banks etc trying to build up their cash reserves ?

They don't need or have to 'justify' it. If you don't like fees, choose a fee-free deal. No big deal.
Are you suggesting that any company that offers a product or service at a profit should have to 'justify' it?

Thrugelmir

brian_sp wrote: »

GMS can you advise of the point of a base rate if no one is able to borrow at that rate?

Base rate is used for transactions between the BOE and banks.

Banks require retail deposits ( i.e. savers money) to fund mortgages. Savers will deposit their money elsewhere if all they offered is 0%.

dunstonh

The higher arrangement fee mortgages tend to have lower rates which are aimed at the larger borrowers. This gives consumers a choice in the market to go with what is best for them. Someone with a smaller mortgage with high fees/lower rate probably hasn't down the research well enough.