Non-refundable mortgage fees Natwest

therightthingtodo_2

Thank you all for replying, foolishly I didn't read all the small print and assumed the property purchase would complete. from the term it doesn't look like it matters whether you pay up front or add it to the loan.

I recognise that there is some cost involved in securing a fixed rate, but surely the true cost can't be £99 on some occasions and £2495 in others, and i think you're right about the fee ensuring a headline grabbing rate. In future I would be tempted to avoid fixed rates other than for re-mortgages given the risk involved and I when everything settles down I will send a letter asking for a partial refund of the £2495.

here's their terms:

"If you are applying for a fixed rate mortgage that has an arrangement fee, this is non-refundable unless we decline to make you an offer.
The arrangement fee for these mortgages reserves your mortgage rate for a period of three months. If you have chosen to add your
arrangement fee to your mortgage, the amount of the arrangement fee will be charged to the bank account detailed if you no longer
require this mortgage after submitting this application."

dunstonh

I recognise that there is some cost involved in securing a fixed rate, but surely the true cost can't be £99 on some occasions and £2495 in others

Banks allocate certain amounts of funds to be available on special terms. if you book £x of that then the more you book, the more it costs the bank if you do not proceed. This is because they finance the deals from other sources (fixed term deposits or corporate investors/money markets) and they will want to be paid regardless.

hamster2013

put yourself in the bank's shoes

assume you asked for a £500k mortage, at an interesting rate
they say ok and reserve that money for you after you pay the fee's

so that means to keep their lending ratio at regulatory acceptable levels compared to their reserves, they have to turn down other people as they have reserved that spot for you.
if you decide not to use that money, they have still provided you with a service of keeping those funds on the side for you and you paid for that service.

if you had not paid and had not reserved those funds and were just at the mortgage in principle stages for example - they could have given those funds to someone else, and when you finally decided, maybe they would no longer e in a position to lend more funds, and therfore have to reject you.

money doesnt grow on tree's, and that is applicable to banks too - so i dont feel its unfair - but does suck
I lost as well twice very recently where had to pay for mortgage fee's and valuation and solicitor etc and seller pulled out before exchange.

its the laws of the country that need to be changed, not the banking fee's which are very clear around the risk you take and the service you are paying for.

JimmyTheWig

therightthingtodo wrote: »

"... If you have chosen to add your arrangement fee to your mortgage, the amount of the arrangement fee will be charged to the bank account detailed if you no longer require this mortgage after submitting this application."

At least they are treating all customers the same with this.

dunstonh wrote: »

Banks allocate certain amounts of funds to be available on special terms. if you book £x of that then the more you book, the more it costs the bank if you do not proceed. This is because they finance the deals from other sources (fixed term deposits or corporate investors/money markets) and they will want to be paid regardless.

But surely the bank would be able to lend the money out to someone. Just means the next application they get they won't have to secure funds for.

hamster2013

JimmyTheWig wrote: »

But surely the bank would be able to lend the money out to someone. Just means the next application they get they won't have to secure funds for.

what about all the business they turned down while they held the funds for you?
surely someone will have to pay for that.
:beer:

dunstonh

But surely the bank would be able to lend the money out to someone. Just means the next application they get they won't have to secure funds for.

What if the deal is pulled or expires in the meantime? The bank is left financing the investors or paying a penalty. Unlike the standard variable rate or similar, the bank finances each tranche independently of any other.

Thrugelmir

JimmyTheWig wrote: »

But surely the bank would be able to lend the money out to someone. Just means the next application they get they won't have to secure funds for.

So they'll only be so much available in the tranche to advance. Let's say £300 million as an example. Once utilised the offer will be closed.

The purpose of the high fees is to stop people reserving some money. Then opting out as another lender is offering a better deal.

Lenders are flexible however. As retaining a customer is equally important. So in genuine circumstances there's an normally other options available.

JimmyTheWig

dunstonh wrote: »

What if the deal is pulled or expires in the meantime? The bank is left financing the investors or paying a penalty. Unlike the standard variable rate or similar, the bank finances each tranche independently of any other.

In those cases, then, there has been money wasted.
It would be unfair, and unworkable, to charge those for whom this applied to. So it seems reasonable to charge everyone who pulls out enough to cover these cases.
Presumably this isn't the case more than, say, 10% of the time.
So would it not be reasonable to charge everyone who pulls out 10% of the fee (and refund the other 90% if already paid)?

TrickyDicky101

You're misunderstanding what these fees represent - to offer a rate below the bank's cost of funding, the difference must be met from somewhere. This is the fee that the banks charge.

Commonly, when allocating funding for a particular rate, the bank will enter the swaps market and secure funds at a given fixed rate (in line with the rate for the funds to be provided to mortgagors). This costs the bank the difference between whatever its funding rate is and whatever rate it has agreed.

Even if the potential mortgagor doesn't take out a mortgage, the bank has still incurred these costs and so must meet them to its swap counterparty. Hence why it still charges them on to the borrower (who now isn't, of course).

Rafter

Accept the comments from advisors here but still feel Natwest are being unethical and need to be challenged by 'therightthingtodo' to justify this.

Generally the arrangement or booking fees are not variable but fixed - same fee whatever the size of the loan - so how can they possibly argue it is the cost of arranging the funding - which will be variable depending on the size of the loan?

Other mortgage providers have must lower fees and a higher rate for the same term fixed rate mortgage - in these cases they will pay much less non-refundable fees if the loan doesn't go ahead.

The customer hasn't received the loan (or the benefit of the fixed rate swap) so how can it still be charged for?

It should be perfectly reasonable for the lender to estimate how much fixed rate funding they should need for each product, allowing for the fact that some loans will not proceed to avoid being left with funding it doesn't need.

Non-refundable fees, beyond a reasonable admin fee for processing the application are simple profiteering and should be banned in my view!

R.