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

MortgageMamma

Mr_helpful wrote:

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.

The lenders fee's will have increased partially in line with inflation and partly because now mortgages are regulated, the cost of adhering to that regulation hits us all, brokers, lenders and insurers alike where it hurts most - in the pocket. The FSA regulated mortgages to provide the public with consumer protection - the cost of regulation has to come somewhere. One way to think of it is that in paying the fee's a consumer is indirectly insuring themselves against mis sales and unfair contract terms. The cost of regulation has been heavy on the industry and CAN ONLY be met by increasing costs to consumers or none of us, brokers or lenders or insurers alike would remain viable businesses.

Looking forward to our course in March.:beer:

MM

PosterBoy77

MortgageMamma wrote:

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

I'm not sure why you feel that you need to explain how fees affect mortgage deals. I know that the better the rate, the higher the fees tend to be with mortgages. My only issue with lenders these days is how they are using every trick in the book to provide a good advertised rate to attract the punters and then sting them by things many will not understand. It is just the same as 0% for 6 months interest credit cards with a 3% balance transfer fee. The effective rate is 6% to start off with, but punters do not realise.

I have sold my BTL properties over the last couple of years due to decreasing yields, higher interest rates and the ever higher fees which will be likely when trying to get a good mortgage deal. In the BTL market especially, the lenders realise that they have a captive market and that most landords will need to remortgage in order to keep their interest payments as low as possible. Many landlords also now own properties that would not qualify for a mortgage with another lender due to decreasing yields. Many now have to switch product with the lender they are with and stump up the high fees.

PosterBoy77

HelpWhereIcan wrote:

Is a supermarket open and transparent with you about their charging structure? How much do they hide by using Bogof's or 2 for 3s for example.

this is not just a charge that can be levelled at Financial Services, just that this subject is one of the most emotive... hence the reason why it is one of the most heavily regulated of all.

I do agree that Financial Services are far from the only gulity ones! Confusion and obfuscation is being used by many businesses now. The mobile phone industry is a prime example.

millsy1980

mikael wrote:

I'm not sure why you feel that you need to explain how fees affect mortgage deals. I know that the better the rate, the higher the fees tend to be with mortgages. My only issue with lenders these days is how they are using every trick in the book to provide a good advertised rate to attract the punters and then sting them by things many will not understand. It is just the same as 0% for 6 months interest credit cards with a 3% balance transfer fee. The effective rate is 6% to start off with, but punters do not realise.

I have sold my BTL properties over the last couple of years due to decreasing yields, higher interest rates and the ever higher fees which will be likely when trying to get a good mortgage deal. In the BTL market especially, the lenders realise that they have a captive market and that most landords will need to remortgage in order to keep their interest payments as low as possible. Many landlords also now own properties that would not qualify for a mortgage with another lender due to decreasing yields. Many now have to switch product with the lender they are with and stump up the high fees.

BTL's are higher risk lending than residential lending, and therefore a couple of years ago rates for BTL's were significantly higher than residential rates. Then the BTL boom hit with every joe public wanting one, but guess what, they didn't want to pay 0.5-1% higher than a residential rate, so lenders gave the option to have lower rates but with higher fees (spreading the risk). This gave customers the lower payments they wanted to fit in line with their rents. The options to have lower fees is still available in the BTL market, but the rates are higher, but then BTL investors don't cover their mortgage payments with the rent.

You made the choice of selling your BTL's, others haven't and have paid the fees, it is your choice. Do you really expect lenders to hold their rates for you? Is it the lenders fault that rental yields have decreased? Sounds a bit like sour grapes to me!

PosterBoy77

millsy1980 wrote:

BTL's are higher risk lending than residential lending, and therefore a couple of years ago rates for BTL's were significantly higher than residential rates. Then the BTL boom hit with every joe public wanting one, but guess what, they didn't want to pay 0.5-1% higher than a residential rate, so lenders gave the option to have lower rates but with higher fees (spreading the risk). This gave customers the lower payments they wanted to fit in line with their rents. The options to have lower fees is still available in the BTL market, but the rates are higher, but then BTL investors don't cover their mortgage payments with the rent.

You made the choice of selling your BTL's, others haven't and have paid the fees, it is your choice. Do you really expect lenders to hold their rates for you? Is it the lenders fault that rental yields have decreased? Sounds a bit like sour grapes to me!

You seem to keep thinking that I have some sort of issue with lenders?! I don't, but I do understand how many people can get stung by them, which you do not seem to be getting!

I have no reason for having sour grapes - I sold my BTL's at a good profit, and don't have to blame the banks for anything!

BTL lending has actually proved to be lower risk than many other types of lending, and as a mortgage adviser, I'm surprised you don't seem to know that?

I don't blame the mortgage lenders at all for trying to cash in on higher fees, if people are silly enough to borrow too much and limit their mortgage options that is their problem. I was only giving it as an example were banks are using their position to grab as much cash as possible, as I have first hand expereince of dealing with them in that capacity.

My only issue is with lenders advertising good rates and confusing customers with fees, making their products harder to understand for the average person - not me.

It seems that all the advisers here except for Mr Helpful fail to grasp this one and only complaint of mine!

millsy1980

mikael wrote:

You seem to keep thinking that I have some sort of issue with lenders?! I don't, but I do understand how many people can get stung by them, which you do not seem to be getting!

I went on a course a few years ago where one of the pieces of information I took away was that where ever a sentence contains the word but, you can ignore everything that preceded it! So by saying you don't have an issue with lenders, then going on to finish the sentence in the way you do makes me think otherwise!

BTL does have a higher risk because generally people are taking on higher financial committments. They already have a residential mortgage that their earned income is paying for. The BTL is seen as more risky because essentially it’s the tenants who pay back the loan, not the borrower. The higher rate is therefore the lender’s way of covering itself. Not to mention the fact that these loans are generally on an interest only basis whereby more recently deposits required for BTL's have lowered to just 10%. We all know it is not a given that house prices have to keep rising.

With regards to the advertising of rates, all adverts are regulated by the FSA, whose sole focus when taking over the the regulation of the mortgage industry was to make mortgages more transparent for consumers. Fees are clearly stated so how can it be confusing? Are there any examples of this advertising of good rates that confuses customers with fees? If you have some links to them please post them and we can have a look so that we can try and grasp this complaint.

MarkyMarkD

An example of the sort of thing that people complain about is the recent Halifax product, 1.99% fixed for one year followed by 6.49% fixed for four years with a 5 year tie and a £1,999 fee.

Now, the Mail (This is Money etc) slagged this off because it wasn't clearly advertised, but the page on the Halifax's website listing the product is 100% bloody obvious about the £1,999 fee.

This IS a crap product, but mainly because the average rate over the five years is rubbish compared to other straight 5 year products. The fee being high as well is just the icing on the cake.

But the reason it's an awful product isn't INHERENTLY because it has a high fee. It's the combination of rubbish rates AND a high fee.

And to claim it's misleadingly advertised is cobblers. It's obvious to anyone who spends 3 minutes working out the product's benefits that it's a poor deal.

Mr_helpful

Millsy
" With regards to the advertising of rates, all adverts are regulated by the FSA, whose sole focus when taking over the the regulation of the mortgage industry was to make mortgages more transparent for consumers. Fees are clearly stated so how can it be confusing? Are there any examples of this advertising of good rates that confuses customers with fees? If you have some links to them please post them and we can have a look so that we can try and grasp this complaint. "

Yes the FSA is in charge of advertising. There, is the problem, that it does not regulate the fees themselves and they also have sod all experience in the advertising market themselves and it is clear that almost all the advisers on this forum havent a clue either. I have seen advisers trying to work out the effect of a fee over the fixed / discounted period but that is not correct because the client is paying interest on the fee long after his initial period ends. If he remortgages he is remortgaging the fees as well so he is still paying the fee long after he is with a different lender. Obviously its no use looking at APR either as this doesnt take into account remortgaging either. The real thing is that these fees are a very good way of making money for the lenders in what looks like a transparent way which is in reality almost like a stealth tax on your home and is not transparent in the least.
The FSA's real track record of regulation is terrible as far as the consumer is concerned. With relation to selling the FSA has only just realised that by use of certain language tactics one can persuade a client to buy something they dont understand or dont want. How long have selling skills been taught by lenders networks and brokers. The only saviour for the punter is that most of these courses are fairly low standard. This is also true of brokers, How many brokers on this forum have sold endowments , single premium payment protection, or other insurances in inappropriate circumstances? probably not with bad intentions but having received bad training from the lenders and insurers. Some advisers are young and have not seen the market in negative equity and also do not really understand how regulation works
In 1999 I was almost thrown out of a sales seminar for single premium PPI for saying it was crap. It took the FSA about 7 more tears to work it out for themselves just how dodgy these policies are and strangely enough its the same reason as fees.. How many years did it take them to work out what was wrong with endowments and personal pensions? It will take them the same amount of time to realise these fees are ripping off Joe Public who is the very person they are meant to be protecting.

PosterBoy77

Another very good post by Mr Helpful. As he points out, when fees get added to the mortgage capital, as invariably they do, there are further unintended consequneces - the compounding effect of interest upon them over the years make them the complete rip-off they are and not very transparetnt at all. Just like some credit cards now who are charging interest on the 3% fee they charge for a balance transfer, but because the fee is classed as a purchase and balance trasfers get paid off first, the customer is unable to stop paying interest on the fee until they have cleared the balance they have transferred. In the meanwhile the interest compounds on the fee, and the fee itself ends up costing much more than 3%. However it cannot be easily quantified as the total cost will depend upon exactly how long someone takes to pay of the balance they have transferred.

Wig

toonfish wrote:

so everyone gets a base rate tracker - great!

I didn't say that did I? I have said earlier in this thread there would still be a range of different mortgages available, but they would *all* have to easily directly comparable with each other within their own sub category (like I assume the cat std mort is now) what would be eliminated is multiple fees for this that and the other. There may also be only one fee allowed for the whole mortgage to encompass evrything, and it may have a gov set cap.