Mortgage Fees

StevePotter

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 ?

You're the borrower and they are the lender but the chances are that your taxes bailed them out, BUT they STILL call the shots? If you disagree with their 'product' (LOL) fees then I suggest you keep saving and saving till you get to 100% of purchase price!

MarkyMarkD

StevePotter wrote: »

You're the borrower and they are the lender but the chances are that your taxes bailed them out, BUT they STILL call the shots? If you disagree with their 'product' (LOL) fees then I suggest you keep saving and saving till you get to 100% of purchase price!

So what, Steve? Do you expect taxpayers to subsidise potential borrowers, as that would be the effect of the nationalised or part-nationalised banks pricing at lower rates than the vast majority of lenders?

Surely not. The nationalised and part-nationalised banks should be run to make a profit so that the taxpayer can sell their shares in due course and recoup their investment.

The "bail out" is an investment, not a gift.

brian_sp

Andy , My point was that the fees do not in any way related to reasonable expenses incurred by the bank to process a mortgage application.After all what is the difference in processing a fixed rate or variable mortgage.Not much difference I would have thought.The rate they charge for fixed rate is so much higher and surely the work involved is very similar.Being very generous I cannot see each fixed rate application taking more than a days work which means you are paying over £100 per hour to process an application.This surely cannot in any way be anywhere near costs involved.Banks were slated in the last few years for letters sent re overdrafts etc sent to customers which were very high and eventually reduced.Banks are obviously there to make money and obviously there are some admin fees involved and profit to make but a £1000 admin fee to process a mortgage.Where does that come from and can it be justified ??

_Andy_

brian_sp wrote: »

Andy , My point was that the fees do not in any way related to reasonable expenses incurred by the bank to process a mortgage application.After all what is the difference in processing a fixed rate or variable mortgage.Not much difference I would have thought.The rate they charge for fixed rate is so much higher and surely the work involved is very similar.Being very generous I cannot see each fixed rate application taking more than a days work which means you are paying over £100 per hour to process an application.This surely cannot in any way be anywhere near costs involved.Banks were slated in the last few years for letters sent re overdrafts etc sent to customers which were very high and eventually reduced.Banks are obviously there to make money and obviously there are some admin fees involved and profit to make but a £1000 admin fee to process a mortgage.Where does that come from and can it be justified ??

Like I said, they don't have to justify them. Your post shows your lack of knowledge about how products are funded, money market etc.

Thrugelmir

brian_sp wrote: »

After all what is the difference in processing a fixed rate or variable mortgage.Not much difference I would have thought.The rate they charge for fixed rate is so much higher and surely the work involved is very similar.Being very generous I cannot see each fixed rate application taking more than a days work which means you are paying over £100 per hour to process an application.This surely cannot in any way be anywhere near costs involved.Banks were slated in the last few years for letters sent re overdrafts etc sent to customers which were very high and eventually reduced.Banks are obviously there to make money and obviously there are some admin fees involved and profit to make but a £1000 admin fee to process a mortgage.Where does that come from and can it be justified ??

As a consumer you choose from the most suitable products available to you, depending on your personal circumstances.

You can take any product available on the High Street and question why it costs so much. From a cup of coffee to a ball point pen. If you don't like what's on offer either shop somewhere else or do without.

brian_sp

That may well be the case.I do not for one minute claim to be an expert and am simply giving an opinion re fees

kingstreet

Brian - the way I look at something like this is, is as follows;-

- the lender has "x" amount to put into a mortgage deal and this is worked out between the marketing team (catch the client) and the treasury team (catch the rate). Between them they work out the best "catch-all" scenario.

Here's an example;-

A - 5.75% fixed for 3 years with £999 fee

and

B - 5.99% fixed for 3 years with £Nil fee.

If you apply these figures to a £100k interest-only mortgage, choosing Option A means a total bill of £18,249 over the three years. The same borrower choosing Option B would pay £17,970.

So the borrower of a smaller sum is better off with the no fee deal.

However, if you then apply the same options to a borrower of £200k, Option A takes on a cost of £35,499. Option B is then the more expensive option at a total cost of £35,940.

So the borrower of a higher sum benefits from paying the higher fee and lower rate.

Effectively, it matters little if you pay a fee or not as the lender works out how much it can make from each mortgage account and prices the rate, fees etc accordingly. My examples may be extreme at 0.24% difference. It may be as little as 0.1% in some cases.

brian_sp

kingstreet wrote: »

Brian - the way I look at something like this is, is as follows;-

- the lender has "x" amount to put into a mortgage deal and this is worked out between the marketing team (catch the client) and the treasury team (catch the rate). Between them they work out the best "catch-all" scenario.

Here's an example;-

A - 5.75% fixed for 3 years with £999 fee

and

B - 5.99% fixed for 3 years with £Nil fee.

If you apply these figures to a £100k interest-only mortgage, choosing Option A means a total bill of £18,249 over the three years. The same borrower choosing Option B would pay £17,970.

So the borrower of a smaller sum is better off with the no fee deal.

However, if you then apply the same options to a borrower of £200k, Option A takes on a cost of £35,499. Option B is then the more expensive option at a total cost of £35,940.

So the borrower of a higher sum benefits from paying the higher fee and lower rate.

Effectively, it matters little if you pay a fee or not as the lender works out how much it can make from each mortgage account and prices the rate, fees etc accordingly. My examples may be extreme at 0.24% difference. It may be as little as 0.1% in some cases.

That does make sense and I appreciate the example as makes it much clearer.

dunstonh

Where does that come from and can it be justified ??

They dont need to be justified. As as already been said, mortgages are packaged and priced for different segments of the market.

To use the TV analogy that we have used before, you can go into Currys and see TVs costing from £60 to £6000. You get the one that suits you. You dont buy the £6000 and then whinge that its not fair it doesnt cost £60. Mortgages are the same. There is no point buying a high fee/low rate mortgage designed for larger borrowers if you only have a small mortgage.

koexelek

brian_sp wrote: »

Most are best part of £1000.

Which is reasonable in this day and age.
Some lenders are charging up to 3% of the loan size. which can run into many thousands.

The reason the lenders charge high fees is because they can. If a lender does something few others don't they can virtually charge what they like