Annoyed at mortgage arrangement fees, is it a rip off?

hooded_claw_2

Is there anyone out there who is also annoyed at the fees charged when applying for a mortgage?
Recently I was looking to remortgage as our current fixed rate deal was coming to an end. On looking at the offers around for another fixed rate, the majority require some kind of booking fee ranging from £300 to over a £1000.

Don’t the lenders make enough money from us as it is?

I was particularly annoyed that even if I stayed with my current lender Northern Rock, I would still have to pay £995:mad: for the privilege of them lending me the money.

Worse still I was told I would also have to pay a ‘mortgage review’ fee of £295! Which was strange as this did not actually involve a mortgage review! When I enquired why I had to pay this, I was told it was an administrative charge. So if nothing else it’s a breach of trade description. However if I just reverted to the standard interest rate there is no charge, but surely whether I opted for the standard variable or fixed interest rate there would still be admin work to do. Again it just seems a quick way for the lenders to make easy money, when in actual fact they are doing no extra work.

Many companies also pretend they are doing you a favour by allowing you to add the fee to the mortgage. So not only are they sneakily getting you to add money to your mortgage, they will also charge you interest on it.

People would be outraged if they went to the petrol station to fill up the car but had to pay the garage owner a fee for the privilege of selling them petrol! How is this any different?

toonfish

large fees are an inherent part of cheap mortgages - it's the only area for the lender to make a profit. If you don't want to pay them, just find a lender that doesn't charge

dunstonh

Don’t the lenders make enough money from us as it is?

Not as much as you think nowadays.

I would still have to pay £995:mad: for the privilege of them lending me the money.

They dont have to lend you the money.

People would be outraged if they went to the petrol station to fill up the car but had to pay the garage owner a fee for the privilege of selling them petrol! How is this any different?

If you dont want a mortgage with fees, then pick one where they move the costs into the interest rate. You should be pleased that this choice exists.

For many people, paying higher fees and a lower interest rate is the better option. For others, paying no/low fees and a higher interest rate is the better option.

LisaT186

It's all ways of slicing the cake. Taking the garage scenario, if you had the option of cheaper petrol and paying a fee or paying the full price per litre, you would choose the cheapest whichever one it turned out to be. You can have the higher mortgage interest rate with no fee, or you can have the loser rate with a fee - up to you! (Have to say you could argue that the mortgage review fee is steep at £295, particularly when they only charge you £250 to close your mortgage down!)

MortgageMamma

You know, it makes me laugh all this "i despise fee's" business

Money is what makes the world go round. People expect everything for nothing these days. I know the charging structure on mortgages can be complicated, but thats what mortgage brokers are for. If people continue to go to banks and building societies direct for their mortgages, then I have no sympathy if they are charged a large uncompetitive fee.

DoshSaver

hooded_claw wrote:

Is there anyone out there who is also annoyed at the fees charged when applying for a mortgage?
Recently I was looking to remortgage as our current fixed rate deal was coming to an end. On looking at the offers around for another fixed rate, the majority require some kind of booking fee ranging from £300 to over a £1000.

Don’t the lenders make enough money from us as it is?

I was particularly annoyed that even if I stayed with my current lender Northern Rock, I would still have to pay £995:mad: for the privilege of them lending me the money.

Worse still I was told I would also have to pay a ‘mortgage review’ fee of £295! Which was strange as this did not actually involve a mortgage review! When I enquired why I had to pay this, I was told it was an administrative charge. So if nothing else it’s a breach of trade description. However if I just reverted to the standard interest rate there is no charge, but surely whether I opted for the standard variable or fixed interest rate there would still be admin work to do. Again it just seems a quick way for the lenders to make easy money, when in actual fact they are doing no extra work.

Many companies also pretend they are doing you a favour by allowing you to add the fee to the mortgage. So not only are they sneakily getting you to add money to your mortgage, they will also charge you interest on it.

People would be outraged if they went to the petrol station to fill up the car but had to pay the garage owner a fee for the privilege of selling them petrol! How is this any different?

I whole heartedly agree with you hooded claw! Its all very well saying “it’s the way the world goes round” but it’s only too common to find that these “Arrangements” leave customers open to all sorts of complications and scams. I raised this in a previous thread here http://forums.moneysavingexpert.com/showthread.html?p=4350065#post4350065

I am currently completing my remortgage with ING Direct and have (nor had) absolutely no issues what so ever with their straight forward product. (Flexible standard variable rate 5.14% 5.3APR) NO FEES what so ever to leave or join. Overpayments, holidays etc. are fine. That’s stress free! (note: the more negative elements will point out it has not upped it to what ING say is their option of max 0.9% above base rate yet (after 1st of following month after bank England rise) but even if they did counting in some of the these other companies advertised fees i.e. £700 and above in some cases much more over as little as 2 years PLUS potentially £295 redemption fees, INGS product is still exceptionally good, and it’s stress free!

danjberry

can i just ask make what trainers do you wear? everyone these days are moaning about bank fees etc when everyday you are paying way over the odds for everything else. trainers cost pennies to make, and nike and addidas are selling these at least £70. They are a business and are there to make money, if you owned a business would you do everything you can to make money, just like every other company. if you dont want to pay these fees shop around and get a different product.

MarkyMarkD

I can't disagree with anything dunstonh has said.

Any "best buy" mortgage product nowadays consists of a loss-making rate of interest coupled with some fees. As a whole it makes the lender a bit of money; taking the interest on its own, it doesn't.

That applies just as much for existing borrowers wanting to change products as it does to new borrowers or remortgagers.

And, to the extent that it's relevant, there's no work involved in a mortgage account reverting to its originally intended rate such as SVR - that is what happens if the lender doesn't press any buttons on its computer. There is some work involved in switching you to a new mortgage product, but the main reason there's a fee isn't because of the work involved but because the lender is changing your account from one which makes them a lot of money in interest margin to one which loses them money or makes next to nothing in interest margin.

Product switch fees of even £995+£295 as you mention for Northern Rock, whilst quite steep, are nothing compared to paying a rate around 2% higher (on their SVR compared to their better value rates) - break-even on a £100k loan is in 16 months or so. And nobody's forcing you to switch products if you'd rather pay no fee and pay a higher (SVR) interest rate instead.

dunstonh

My fence was blown down in the gales. I got a quote so I knew what the costs were up front and I agreed those terms and he did the job. Should I now refuse to pay because I think its unfair?

Lenders have to cover the costs of borrowing the money themselves, cover the costs of the staff and administration involved, cover the costs of the people that will default and go bad as well as turn a profit.

If you agree the terms of all this before you borrow (which you do) then its your own bloody fault if you think the terms are not reasonable.

Wig

I am also looking for a mortgage at the moment. And I agree the fees are rediculous and should be banned.

I just looked at 2 lenders (early days)
40k mort, repayment, approx 50% LTV 25 yrs
Nationwide 2yr discount 4.98% £600 fee £237 p/m (fee incorporated) they don't say what the rate reverts to (I assume variable base rate).
Nationwide Variable base rate 6.74% NO FEE £276.11 p/m Unknown leaving fees.

ING 5.14% (5.3% apr - so there must be some fees somewhere)
NO arrangement FEE £237 p/m No leaving fees.

So ING is definately the best offer so far but like I say - early days.

Wig

DoshSaver wrote:

(note: the more negative elements will point out it has not upped it to what ING say is their option of max 0.9% above base rate yet (after 1st of following month after bank England rise) but even if they did counting in some of the these other companies advertised fees i.e. £700 and above in some cases much more over as little as 2 years PLUS potentially £295 redemption fees, INGS product is still exceptionally good, and it’s stress free!

What do you mean by this? - Oh hang on I think I just understood, they have not yet upped their rate after the recent BOE rate rise. Well they are under no obligation to do so, but it is useful information to keep in mind. (i.e. they might soon up their rates, and they are artificially low at the moment)

Thank you