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

Mr_helpful

Rick
I take your point.
The two areas I was having a go at were the fees that are by percentage eg Northern Rock are now charging 3.5% which is a lot whether its a large or small loan. I realise a fixed fee has less effect on a large loan. You must however admit that fees have risen dramatically since FSA regulation and that cant be good for the customer.
As for choice I disput the word. It is far less about choice and more about confusion and has made advice ver dodgy indeed not because the brokers are dodgy but because it is impossible to accurately compare many products because you dont know the effect of the fees. I would have thought that the brokerages would have learnt the lessons of the past 20 odd years in relation to mis selling and been campaining against these fees. What if in a few years the FSA rules that the fees were bad? Ones PI insurance is going to get expensive isnt it.
The other thing that annoyed me was the people accusing others of being whingers just because they dont like being ripped off by institutions that make in many cases obscene profits. Slanging matches on these threads dont do anyone any good

dunstonh

You must however admit that fees have risen dramatically since FSA regulation and that cant be good for the customer.

You wait until you go full regulation like investment class business and then you really will know how much the costs go up Rumours have it that the FSA isnt happy with the light touch regulation that currently exists and wants to go full regulation.

MortgageMamma

Mr_helpful wrote:

The other thing that annoyed me was the people accusing others of being whingers just because they dont like being ripped off by institutions that make in many cases obscene profits. Slanging matches on these threads dont do anyone any good

Your going to get a smacked bottom Mr Helpful, and it won't be the nice sort. Tut Tut

MM

Mr_helpful

MM
Cant wait but are you going to charge me a fee like last time
xxxx

MortgageMamma

Thats two slaps for you Helpful!

Watch it or I will discredit you by letting the entire forum know about your secret hobby

dunstonh

two slaps??? How come he is getting buy one get one free???

Rick62

Helpful, I agree, some of these % fees are too high and usually do not offer good value. Particularly in the (unregulated) BTL market they are very common and I suspect are often missold by poor advisers who just add them to the loan (thus spreading the cost over, say, 25 years) but then only compare monthly payments.

I would like to see product fees have to be repaid only over the initial Fixed/Discount period, rather than just added to the loan, that would be a lot clearer and easier to understand and compare.

ps, MM I think he might actually get quite a lot of credit, but this is a public forum!

absolutebounder

Looks like old helpful is helping himself to some good savings (in the spirit of this board no doubt) Perhaps we could all learn from him

MortgageMamma

dunstonh wrote:

two slaps??? How come he is getting buy one get one free???

He's a regular. I operate a broker buddy loyalty scheme. I've been a friend in need this week and he's been a friend indeed.

MarkyMarkD

Mr_helpful wrote:

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.

This is a worryingly wrong statement from someone who's meant to know what they are talking about.

Take a £100k interest only mortgage on a 2 year tracker at 5% with a £1,000 fee, compared to a tracker at 5.5% with no fee.

For the product with fees:

Initial advance £101,000.

Total interest over 2 years = £101,000 x 5% x 2 = £10,100 and an extra £1,000 to repay the loan = total cost £11,100.

For the product without fees:

Initial advance £100,000.

Total interest over 2 years = £100,000 x 5.5% x 2 = £11,000.

The total cost on the loan with a fee is £10 more.

Now, the obvious way to calculate the impact of the fee on the rate is to take £1,000/£100,000/2 = 0.5%. So a "simplified" method a normal adviser would use to work out the equivalent fee-free rate would give 5.5%.

Now, that's wrong by £10 over two years.

So blinking what???? £10 is immaterial in the context of a mortgage over 2 years. If the two mortgages were exactly the same, in every other regard, then obviously the fee-free option is better. But anyone taking a simplistic approach to working out what fees cost, in impact per year, is going to be so close as to not matter.

And if people choose to remortgage the fees as well, that is THEIR CHOICE. If they repay the extra amount they added to the loan for the fees on redemption (meaning that their total payments over the term are approximately the same in both cases), they don't need to remortgage the fees.

You might as well argue that people who choose longer repayment terms on a repayment mortgage are being ripped off because they aren't paying off "enough" of their capital. Complete balderdash. It's THEIR CHOICE.