Alliance and Leicester Admin Fee to continue fixed rate

BaileySJ

Hi, this is the first time I have posted so apologies if I am breaching any etiquette or rules...

Around 4 years ago my fixed rate term of 2 years was coming to an end on my A&L mortgage, I phoned up for my options and decided to refix for another 3 years (awful decision considering what happened to the base rate, but let's not dwell on that!).

Anyway, they ended up charging me around £1500 for 'admin charges', it has always bothered me as I click mouses (mice?) all day at work and charge nowhere near that.

I once mentioned it to them when calling for something else and they said "they didn't do it anymore as it was a percentage charge etc etc, leave me alone and stop asking about getting a cheaper rate"...

It may be made more difficult as they are now owned by Santander, but any info or insights would be great as this seems somewhat excessive...

Kind regards
Bailey

JimmyTheWig

I don't think it was an admin charge (as you say, would be hard to argue!) but a product charge or similar.
In other words that's the price you pay to get the rate you got.

Assuming that you were told about this charge before you took the new rate (or at least found out about the charge while you could still cancel the new rate) then I'm not sure that there's anything you can do about it.

I don't think it is anything underhand that they do. The same bank might offer a rate of, say, 4.24% with no fee or a rate of 3.99% with a £500 fee. The second rate doesn't take £500 worth of administration, it's just the fee you pay to get the rate you want.
Generally speaking, those with a high mortgage will be better off paying a larger fee to get a smaller rate, while those with a smaller mortgage will be better off accepting a higher rate in order to pay a lower (or no) fee.

BaileySJ

Thanks for your reply, that does make more sense...

I wasn't holding out much hope, it was particularly annoying though as the monthly payment went up around £100 and the charge more that wiped out anything I had paid off to that date!

Still, with my portfolio of 1 small dwelling in a very average area, it's only a matter of time before it pays for itself several times over...

dunstonh

Anyway, they ended up charging me around £1500 for 'admin charges', it has always bothered me as I click mouses (mice?) all day at work and charge nowhere near that.

mouse clicks do not require financing to be obtained and committed to. If it bothered you then why did you buy it?

If you buy a TV from currys, you dont get to go in 5 years later and pick up another one free of charge. You bought your mortgage and then you wanted to another on different terms. Whilst the work level is not as great that way, the fee is to cover the financing arrangements. Plus, the profit model on some fixed rates is to have a low rate but high fee or the other way around. The high fee/low rate model suits larger borrowers. The low fee/high rate suits smaller value borrowers.

BaileySJ

I was being lighthearted about the mouse clicks... It was more a curiosity since they stopped doing it and now charge a much smaller fixed fee.

Incidentally, I had little choice in the matter, the LTV based on the property value at that time meant choices were very limited...

Whilst we are on the subject, you also don't buy a TV from currys and in a few years pay a large sum of money to continue using it... (a poorer version at that)...

I appreciate I would have been informed of all this and profits need to be made in various ways, but this is also true with overdraft charges, and we all know how that panned out...

dunstonh

I was being lighthearted about the mouse clicks... It was more a curiosity since they stopped doing it and now charge a much smaller fixed fee.

My response about financing mouse clicks equally so.... Santander charging lower fees but higher rates tells you more about their current target market rather than anything else.

Whilst we are on the subject, you also don't buy a TV from currys and in a few years pay a large sum of money to continue using it... (a poorer version at that)...

Just as you dont have to pay to buy a new mortgage deal every few years either. You can stick with what you have.

I appreciate I would have been informed of all this and profits need to be made in various ways, but this is also true with overdraft charges, and we all know how that panned out...

...yes. The banks won.

JimmyTheWig

BaileySJ wrote: »

it was particularly annoying though as the monthly payment went up around £100 and the charge more that wiped out anything I had paid off to that date!

BaileySJ wrote: »

Incidentally, I had little choice in the matter, the LTV based on the property value at that time meant choices were very limited...

No help to you now, OP, but this may be useful to consider when your current deal runs out and may be useful to others in a similar situation reading this...

There is always an option to revert to the long-term rate (often the bank's SVR) when a mortgage deal ends.
Obviously with hindsight the (what we now know to be) high rate that you fixed on wasn't a very good deal. But I also wonder, given what you have said, if it actually wasn't a very good deal for you at the time. Hard to say, without knowing all the details, but I think you'd have been better off going on to the SVR.

Presumably when you got this current deal you didn't take any formal advice? Presumably you just contacted A&L and they told you what deals they had?
If you were professionally advised to get this deal then I'd be interested to see the logic in their suggestion.