Mortgage Fees

jamesd

brian_sp wrote: »

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

It isn't really called "base rate". It's real name is "Bank Rate" and it's the overnight money rate offered by the Bank of England to banks. This is lower than most rates in the market and is part of why it's often called base rate, since other rates tend to move up and down as it does. If you were the Bank of England you too might be able to borrow at Bank Rate. But you're not and nor is your daughter's lender.

The cost of setting up a mortgage doesn't matter much when you're comparing fixed and variable rates. What matters there is the difference in the cost of borrowing the money to lend to you. For a fixed rate the lender has to borrow money from a different market and has to pay a premium for the purchase of the money at a fixed rate for the term it's guaranteeing. The cost of that purchase has to be paid for by the borrower. And that's why you can in general expect that fixed rates will cost more than variable rates, they cost more to fund.

Next thing after cost of money is cost of risk of default. A 15% deposit is associated with a higher default risk than a 25% deposit so there's a loading on to the interest rate to cover the higher default rate.

Finally you get to the administrative costs and those can be lower than the other two.

The US mortgage market is somewhat different. Instead of varying fees they have a fixed initial fee and then borrowers can "buy points" (0.01% reduction in interest rate) by paying a higher initial fee. In the UK market the same thing is done by offering a completely different mortgage with a set initial rate. But the effect in the UK is similar, a range of deals with different fee and interest rate levels.

Greenst

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 ?

Brian sp Thanks for posting this question I was going to ask the same thing.! I am looking at mortgages at the moment and also have the dilema of choosing fixed or variable, fee or no fee, higher or lower rate etc etc ! Being a lay person e.g. not in the banking industry I could also not understand how these "admin" fees were calculated, but now I have a better idea of the reasons.

I think I need to post now to ask about my situation I am getting confused as to what to go for fixed or variables, fee or no fee , .2 or 5 years It's mind boggling! I phoned my current lender but they said they can't advise me what's best to go for just tell me about their products. At the moment I feel Like I am pinning the tail in the donkey blindfolded!!!!!

Greenst

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 ?

Brian sp Thanks for posting this question I was going to ask the same thing.! I am looking at mortgages at the moment and also have the dilema of choosing fixed or variable, fee or no fee, higher or lower rate etc etc ! Being a lay person e.g. not in the banking industry I could also not understand how these "admin" fees were calculated, but now I have a better idea of the reasons.

I think I need to post now to ask about my situation I am getting confused as to what to go for fixed or variables, fee or no fee , .2 or 5 years It's mind boggling! I phoned my current lender but they said they can't advise me what's best to go for just tell me about their products. At the moment I feel Like I am pinning the tail in the donkey blindfolded!!!!!

GMS

Greenst wrote: »

Brian sp Thanks for posting this question I was going to ask the same thing.! I am looking at mortgages at the moment and also have the dilema of choosing fixed or variable, fee or no fee, higher or lower rate etc etc ! Being a lay person e.g. not in the banking industry I could also not understand how these "admin" fees were calculated, but now I have a better idea of the reasons.

I think I need to post now to ask about my situation I am getting confused as to what to go for fixed or variables, fee or no fee , .2 or 5 years It's mind boggling! I phoned my current lender but they said they can't advise me what's best to go for just tell me about their products. At the moment I feel Like I am pinning the tail in the donkey blindfolded!!!!!

The fees lenders charge are set so figuring out how they are calculated is not really necessary. However they arrive at them they do. Nothing can change this.

As for fixed or variable it is something only you can decide. Are you the sort of person who likes stability and would want to know what your payments will be, or are you happy to take a risk on payments going up? Stability choose fixed, happy to gamble consider a tracker.

How much are you looking to borrow? How much deposit/equity do you have?

If you are unsure on it all you may benefit from speaking to a broker.

Greenst

GMS wrote: »

The fees lenders charge are set so figuring out how they are calculated is not really necessary. However they arrive at them they do. Nothing can change this.

As for fixed or variable it is something only you can decide. Are you the sort of person who likes stability and would want to know what your payments will be, or are you happy to take a risk on payments going up? Stability choose fixed, happy to gamble consider a tracker.

How much are you looking to borrow? How much deposit/equity do you have?

If you are unsure on it all you may benefit from speaking to a broker.

Yes I think I need to speak to a broker and take a list of questions! May do my own post on here as don't want to hijack this one so I can be a bit more informed when I start the re mortgage process!

Wutang_2

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!

Absolute genius. Thanks Steve