Mortgage Fees

Essenchill

Sometimes I feel really stupid, and so to stop me pondering on this one, I'm looking for the straight answer to what many are going to think is a stupid question.

The whole case against unfair bank charges for overdrafts is hinged on the rule that the bank can only charge the actual cost for carrying out a service and so inflating a charge for a bounced cheque to £30 is unreasonable...

So how are mortgage 'arrangement fees' ok? How can a bank charge thousands in a 'fee' for setting up a mortgage/remortgage on the basis that it's a good deal because the rate is low? Shouldn't a 'mortgage arrangement fee' only be allowed to be the amount it costs the bank to do, just like the administration costs involved in a bounced cheque?

Simplistic I know, but if someone could please point out why its not so simplistic and how its different I would be very grateful.

KTF

The mortgage fee is a fee for a product. You are 'buying' the fixed rate or 'buying' the tracker instead of picking the SVR or some other non fee product.

A BMW 3 series and a Mondeo cost about the same to make but the 3 series sells for a lot more. Does this mean that BMW should be forced to sell the 3 series at the same price as the Mondeo?

Edit: The majority of the mortgage fees are less than a thousand unless they are the ones that are a percentage of the loan.

dwsjarcmcd

You have the choice to pay lower fees, or even no fees but you will pay a higher rate. The arrangement fees are simply part of the overall pricing of the product.
Simple really, the lower the arrangement fee the higher the rate.

Libra1975

I read that high mortgage fees enable banks/building societys to get on best buy tables by making their monthly repayments look lower. This could be absolute rubbish however.

dwsjarcmcd

Libra1975 wrote: »

I read that high mortgage fees enable banks/building societys to get on best buy tables by making their monthly repayments look lower. This could be absolute rubbish however.

No it's not rubbish, almost all lenders use this tactic to get into these tables. The same principles do apply.

mrkbrrws

Essenchill wrote: »

The whole case against unfair bank charges for overdrafts is hinged on the rule that the bank can only charge the actual cost for carrying out a service

No it isn't, because there is no such rule in English law.

The unfair bank charges claims hinge on the rule that you cannot enforce a penalty for breach of contract, only a genuine estimate of losses incurred.

dunstonh

If Tesco sell a tin of beans for 30p and Harrods sell it for 50p does that mean Harrods are making "illegal" charges?

No. And mortgages are retail products in exactly the same way.

You should also look up the reasons why these arrangement charges exist on mortgages. You will find that they are there because the lender has to go out and source the borrowing at a rate that allows them to lend it to you at a discount. They incur charges and risks in doing so.

Indeed, the risks have really come home to roost when you look at Northern Rock. Perhaps they should have had higher charges.

Dan_Collins_2

dunstonh wrote: »

If Tesco sell a tin of beans for 30p and Harrods sell it for 50p does that mean Harrods are making "illegal" charges?

No. And mortgages are retail products in exactly the same way.

You should also look up the reasons why these arrangement charges exist on mortgages. You will find that they are there because the lender has to go out and source the borrowing at a rate that allows them to lend it to you at a discount. They incur charges and risks in doing so.

Indeed, the risks have really come home to roost when you look at Northern Rock. Perhaps they should have had higher charges.

NR higher fees LOL I dont think they could get higher!! Good points though dunstonh!

Also they are one off fees and the lender/broker has to make you aware of them and highlight them in many ways! bank charges in the past anyway, make up the small print, normally very small print!

herbiesjp

Dan_Collins wrote: »

NR higher fees LOL I dont think they could get higher!! Good points though dunstonh!

Also they are one off fees and the lender/broker has to make you aware of them and highlight them in many ways! bank charges in the past anyway, make up the small print, normally very small print!

Hi Dan

If you have read Martin's code of conduct for brokers, you'll know you need to change your signature

Welcome to the board

Dan_Collins_2

Hi, thanks and thanks!

Some good debates going on also!