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

Indispensable_Hobbes

i think everyone in here is wasting their time trying to make this person see sense.

MortgageMamma

we have a laisez fair economy. I don't dispute consumers should have rights to information, but that information is readily accessible if you look for it regarding mortgages. If you don't understand how mortgage and other financial products work, then learn, if you can't or won't learn, then stop bloody moaning!

If you want to a simple, hassle free, uncomplicated and financially prudent life, consider budhism.

Mr_helpful

Pre the 1986 financial services act mortgages were relatively simple except that often your building soc made you wait longer until you could have the money. Since 1986 choice has grown out of all proportion but that is what the lenders and authorities would have you believe. In fact another "C" word comes with choice and that is cofusion and if you have a client base who is confused it is easy to rip them off and the horrible truth despite the best efforts of us brokers is that very very few people get the best mortgage for themselves which leads to the conclusion that the majority of people are not on the best deal so the lenders win hands down. This model has been copied very well by the mobile phone industry. Do we really need well over 1000 diferent phone tarrifs which leave less than 5% with a deal that is best for them.
We brokers live on the back of this confusion and the FSA lives on our backs the cost of which is born by the consumer. I really do wonder how the consumer in relation to mortgages is in real terms better off thanks to all this choice since the 1986 act. More people seem to lose their homes with lower interest rates.
I agree with the person who started this thread that the fees charged are a total rip off. However I cant do anything about them so its business as usual trying to help customers as cheaply as possible through the maze

hooded_claw_2

I was a little disappointed, but unsurprised that the early replies to my original post were from people with a vested interest in defending fees as that is where they make their money as well. Giving the upsurge in consumer power I can see why the financial industry are patrolling these forums ready to pounce on any threats to their livelihood. They have their agenda, I have mine.
However to get back to my original post, what are arrangement fees paying for?
To pay administrative costs or just another money making avenue?
• Some have implied I am looking for something for nothing (aren’t we all), but my reason for raising the question is that when I took out my first mortgage in 1991 for a five year fixed rate there were no booking fees, and there were still no fees when I took out another fixed rate deal in 1996. There were admin costs then, there are admin costs now, there was competition then, there is competition now, so why the change? Of course I can, and do shop around. However a quick glance on the four main broker websites recommended on this website - the vast majority carry a booking fee if you are looking for a fixed rate deal. There is little choice.
• I fully accept that banks are in this to make a profit, and if they want to charge for a fixed deal mortgage there is nothing illegal in them doing so. However some replies on this forum then imply the banks make this charge because they are making so little profit! So on the one hand I am being unrealistic not to expect banks to make a profit, then on the other hand I am told they charge a fee because banks are running some kind of charity and this is the only way they can turn a profit.
• So to the original post, why does it cost upwards of £1000 to take out fixed rate deal now when it did not 10years ago.
• If I was taking out a first mortgage with a variable rate there is no charge, but a fixed rate there is. Both obviously require admin and forms, so why does one cost so much?
• Banks are in this to make a profit – fine, and consumer power can affect change – fine. We all have agendas.

firesidemaid

i have just remortgaged with my own bank - although i could get the best deal available, i could not get them to move on the £499 arrangement fee.

but, as usual, they have made several mistakes and i feel i have done more of the arranging than they have. also, so far they have forgot to charge me the arrangement fee. if they do remember, i will reiterate all the work done and phone calls made by me.

that's why i stay with them - they muck up each time and i make them pay for it!

dunstonh

The more flexible something becomes, the more options that exist and the more complicated something ends up being.

I fully accept that banks are in this to make a profit, and if they want to charge for a fixed deal mortgage there is nothing illegal in them doing so. However some replies on this forum then imply the banks make this charge because they are making so little profit! So on the one hand I am being unrealistic not to expect banks to make a profit, then on the other hand I am told they charge a fee because banks are running some kind of charity and this is the only way they can turn a profit

No-one has suggested the banks are a charity but some rates are loss leaders with the profit made on other things. This is a well known fact.

• So to the original post, why does it cost upwards of £1000 to take out fixed rate deal now when it did not 10years ago.

Lower margins between rates given to consumers and the rates the bank has bought the funds to lend at. This is why the lowest fixed rates tend to have higher charges. They are much closer to the bone so the profit is built into the fees. The higher fixed rates have the profit built into the margin between what the bank borrow the money for and what they lend it for.

• If I was taking out a first mortgage with a variable rate there is no charge, but a fixed rate there is. Both obviously require admin and forms, so why does one cost so much?

It costs buy the funds to lend to you at that fixed rate. That costs money and the margins are low. The variable rate has no risk to the bank and the gap between what they can buy the money for and lend to you is higher.

Giving the upsurge in consumer power I can see why the financial industry are patrolling these forums ready to pounce on any threats to their livelihood. They have their agenda, I have mine.

There is also a lot stupidity with some consumers on this site thinking that every charge is illegal and that they shouldnt pay anything.

Mr_helpful

hooded claw
The real answer to your question is that they dont really need to charge these fees but then they wouldnt make the billions of profit and so wouldnt be able to pay fat bonuses to staff. and of course contribute so handsomely to old Gordons coffers. Its business, they have the money you dont so you pay their fees or you dont get it, just another example of rip off britain

PosterBoy77

Mr Helpful, I'm glad to see an advisor who has a more balanced view appear on here!

MortgageMamma

mikael wrote:

Mr Helpful, I'm glad to see an advisor who has a more balanced view appear on here!

I know this guy personally, and he has very different views sometimes to that of other advisers and has been around in the industry for a long time, a lot longer than me. He's not your average loaded financial bod as he does business on reputation only and NEVER charges a fee, no matter how big or small the case. one of the most ethical advisers I know, and I respect his viewpoint - but we do differ in opinion on this one

Anyway back to the subject - its basically swings and roundabouts and yes it is complex to the non qualified individual - BUT you either get a groundbreaking rate with a fee attached or a not so good rate with a moderate fee, or a poor rate with no fee. Either way, the lenders going to make their money out of you, thats what business is about - its healthy.

If you don't like being faced with a good rate and a big fee, choose the no fee option. If you dont mind fee's pay a fee. If you don't mind a moderate fee, then pay it.

At the end of the day, all you need to be able to do is use a calculator to work out whats best for you. How long you have got to make comparisons is up to you, I did a quick search on trigold the other day to look at all 2 year fixes and there were tens of thousands. Thats why anyone savvy enough will use a fee's free broker.

I'm a big believe in using subject professionals, accountants, lawyers, decoraters, plumbers, electricians. If you want a proper job doing thats what you have to do. If you do it yourself 90% of the time you'll bodge the job.

MM

Mr_helpful

MM
I'm a big believe in using subject professionals, accountants, lawyers, decoraters, plumbers, electricians. If you want a proper job doing thats what you have to do. If you do it yourself 90% of the time you'll bodge the job.

Good point
We may not always agree on everything but I am with you on that quote but it is interesting to note how fees have rocketed since the FSA took over regulation of mortgages.
On the B2L side the fees of course allow a lower rate so the rental income still stands a chance of stacking up otherwise the B2L market will colapse. God knows what the fees will be like if rates go up much more.