Fee added before the rate begins?

kingstreet

You can't add a fee to a mortgage account which doesn't yet exist, so the comparison with paying an upfront fee on a new mortgage suits your situation better.

If the lender did not collect your fee, you would have an incentive to wait and see what happens to rates before deciding if you still want to proceed, or if you decide to go elsewhere.

I understand about the interest, I just think the only other option open to the lender would be to demand you pay the fee upfront and not offer the add to loan option.

Mishomeister

kingstreet wrote: »

You can't add a fee to a mortgage account which doesn't yet exist, so the comparison with paying an upfront fee on a new mortgage suits your situation better.

The mortgage account with HSBC starts it's existence as soon as thr mortgage has been approved it is just showing a £0 balance until the drawdown of the funds.

kingstreet wrote: »

If the lender did not collect your fee, you would have an incentive to wait and see what happens to rates before deciding if you still want to proceed, or if you decide to go elsewhere.

Well, the new customers do have that incentive as so the rate switching customers of another banks. So don't see the reason why existing customers should be treated differently.

kingstreet wrote: »

I understand about the interest, I just think the only other option open to the lender would be to demand you pay the fee upfront and not offer the add to loan option.

The are some lenders (At least on a buy to let side of mortgage business) that specifically don't charge the customer any interest on the fees added.

A few years back There would be a number of customers coming off expensive >5% fixes. At the same time there were some 'special' HSBC deals with the fees of £2000 - £2500.

So someone by getting the deal secured 3 months in advance were paying the interest of 5% on £2500 per month for 3 months.

Still not a lot. But still the money sneakily earned by a huge corporation.