Mortgage Arrangement fees

cykophysh

Mortgage arrangement fees surely these must be illegal?
I cannot see how the banks can go round charging these, they just feel criminal.
One pays £2.46 for every £1.00 and yet they still want to charge a mortgage arrangement fee?
How do they justify this cost?

AndrewSmith

They are not illegal. You have the choice whether to pay it or not. The fees are payable for a particular product just like any other retail business.

Where does all this end? Will people be saying that car prices are illegal? After all they are far more of a rip off in the UK than a mortgage arrangement fee.

If you don't want to pay a mortgage arrangement fee simply choose a different lender / product that does not have one attached.

I, like anyone else, agree that some lenders charge extortionate arrangement fees and maybe they are a bit unfair, but they will never be judged as unlawful.

You cannot say that you want the lowest rates/best deals without paying the arangement fees That is like saying you want M&S groceries but want to pay Sainsbury's prices.

Will never happen and they will never be judged as illegal or unlawful. A retailer can charge what they want for the provision of a product/service as the consumer has the choice of whether to purchase or not.

pania

Hi cykophysch (or something like that!) basically an arrangement fee is the admin fee/ privelege fee for being allowed a mortgage with a certain lender.

As mr Smith said there are some good deals out there currently with little or no arrangement fees. although these generally come as a higher interest rate to offset the amount.
A good advisor should be able to find the middle ground between a low interest rate and high fees or a higher interest rate and a low fee.
Yes some fees are extortionate and many within the mortgage business would agree with you on that but no their not illegal and an accepted part of mortgage arranging.
It would depend on what is important to you, lower upfront fees or a lower monthly payment.

Don't forget that you can add the arrangement fee into the loan if appropriate for you but you would then be paying interest on that amount also.

Ask your advisor if you are concerened at the arrangement fee that has been recommended, he/she should be able to find something more appropriate or explain their reasons for recommending what they have.

Hope it all works out well,
p
(ps i am a mortgage advisor but nothing here should be construed as financial advice as i do not have your details. These is my opinion on the question posed.)

homer_j_3

Andy makes a very good point and the only thing that I would add is that the £2.46 for every pound borrowed is calculated on you haveing the loan for the full term.

If you were to remortgage as soon as your deal ends then the lender will not have received £2.46 for every £ you borrowed as lenders do not start to rake in their money until you go on the variable rate - in fact they make very little money of their money prior to this point.

The arrangement fees being charged are there to help price the product with a lower interest rate. If you dont want the arrangement fee then as Andy says, go and get a product without one - they do exist but you will pay a higher interest rate.

I understand why you feel they are a rip off and maybe they are not seen as value for money but you need to ask your self - if you can save yourself the cost of the arrangement fee and more by paying it up front in comparison to a fee free deal, why wouldn't you?

homer_j_3

pania - maybe its worth putting the status signature on if you are a mortgage adviser - it will save you typing it every time you post and will ensure that you comply with the forum rules