OMG! £2600 arrangement fee!!!!!

elDeeJay

I was looking at fixed rate mortgages earlier today and found what looked a good deal from the Leeds Building Society. IIRC it was a superb 4.99% for two years. When i dug a bit deeper though i noticed they wanted £2600 as the arrangement fee!
I know there probably isn't any legislation against this kind of underhand tactic (advertising a great low rate then shafting you with underhand charges which amount to little more than blind theft!!!!), but IMO there should be. We all know the associated costs of arranging a mortgage are nothing like this crazy fee and its about time something was done to cap these 'stealth' charges. Were it not for the need to produce a KFI then it may not be as easy to see all charges beforehand.

Do many people fall for this type of trick? I hope not, because its a shocking tactic and just taking advantage of homebuyers when prices are already inflated.

DavidHM

its about time something was done to cap these 'stealth' charges.

I think the first part (above) is addressed by the second part (below):

Were it not for the need to produce a KFI then it may not be as easy to see all charges beforehand

As for the final part of your post:

Do many people fall for this type of trick? I hope not

It depends how big the mortgage is. At £20k it'll never be economical, at £100k it's starting to look interesting (depending on what happens after 2 years), and at £500k the £2,600 is negligible compared to the interest saving over some other products on the market.

I don't think that the high fee is so much about conning people with £60k mortgages into handing over huge amounts (although one or two might) as attracting large, high value mortgage business into this product.

dunstonh

Do many people fall for this type of trick? I hope not, because its a shocking tactic and just taking advantage of homebuyers when prices are already inflated.

I cant see any trick and there is absolutely nothing wrong with it.

As DavidHM says, the deal is unnattractive to smaller borrows but could be quite attractive to larger borrowers.

I know there probably isn't any legislation against this kind of underhand tactic (advertising a great low rate then shafting you with underhand charges which amount to little more than blind theft!!!!), but IMO there should be.

How can you get shafted?

You would be issued with a KFI which covers all the costs to you. Then later on you would be issued with a offer letter confirming the same again (often the solicitor covers the terms off with you as well so you cant miss anything).

Just because the mortgage isnt attractive to you doesnt mean it wont be to someone else.

dwsjarcmcd

To be honest, part of the isue lies withthose companies that compile 'best buy tables' which too many people rely on. Far too often they use the 'pay' rate' only and not the total cost of the loan. Tis encourages lenders to qote low rates amd not bother too much with fees until people get to KFI stage. IMHO we could do worse than having these tables regulated

MortgageMamma

Oh no not another large fee's post

Where's the its not fair gang when you need them?

This could only be deemed unfair if you were incapable of reading and did not have it verbally explained.

Curious_Moose

You could also argue it is unfair to offer a mortgage with no arrangement fee but a higher interest rate. The exact opposite of what you have here.

Different products suit different people. I'm glad we have so many to choose from.

With a fixed rate, just add up all the fees, valuation, legal, interest payments etc over the term and compare that way.

jamesd

There's nothing unfair about it. You are being offered the option to buy a lower interest rate with a higher initial fee. It's up to you to determine whether that is appropriate for you. If you have a large mortgage it may well be the case that the lower interest rate and higher fee is the best deal for you. If your mortgage will be low, then a deal with no initial fee but a higher interest rate may be best.

If you think that it is underhand I suggest you do a web search on "buying points" and mortgage. You'll learn all you need about the more explicit system in the US. The loan you're unhappy with is simply the UK version of it.

ManAtHome

!!!!!! is unfair about an UPFONT fee - clue is in the UPFRONT!

Maybe it is about time something was done - like charging 7% interest with no fees (maybe coming to an area near you "real soon now").

dwight-van-man

I'm sure most lenders would happily go back to the days when they could offer a 1.99% two year fix with a five year erc buried in the small print - far more profitable! Damn you FSA....

mystic_trev

elDeeJay wrote:

I was looking at fixed rate mortgages earlier today and found what looked a good deal from the Leeds Building Society. IIRC it was a superb 4.99% for two years. When i dug a bit deeper though i noticed they wanted £2600 as the arrangement fee!

As has already been pointed out, this could be a really good deal for those taking out a large mortgage. I really can't see what the OP's problem is? Perhaps he thinks the Leeds have become a charitable organisation and should be handing out these mortgages without fees?

elDeeJay

No, you are misunderstanding my point. The reason it is unfair is becuase the actual COST to them to set up and administer to Mortgage is nothing like the £2600 they are quoting. They are just offering a lower rate and trying to claw back some £££ by shafting you on the arrangement fee, which is an underhand tactic.

If it were a fee that accurately reflected the work involved in setting up the mortgage and maintainng it then there would be no problem, but we all know that the costs to the BS in question is NOTHING like that amount.