Fixed Rate - arrangement fee?

mistriladi_2

Hi

I have a fixed rate mortgage with NatWest which is due to expire soon. They have sent me a list of their current fixed rates, 5.69% (£999) and 5.99% (£699). I am in shock. The last time I fixed my mortgage was 2002 and it was for 5 years. Now they are offering me the same rate of 5.69 for 2 years and I have to pay £999 arrangement fee, which I can pay by cheque or have added on to my mortgage.

Is this right. If I refix every 2 years at a grand a go (which I don't have) I'll end up adding another £9000 onto my mortgage. Surely this is wrong?

Any advice please?

dunstonh

Is this right. If I refix every 2 years at a grand a go (which I don't have) I'll end up adding another £9000 onto my mortgage. Surely this is wrong?

Why is it wrong?

No-one is forcing you to buy a new product. No-one is forcing you to fix over 2 years and not 5 or 10.

If you buy a TV, do you expect Currys to replace it every two years free of charge with a new one?

If you dont like it and you cannot afford it then you dont buy it. As simple as that.

cazziebo

I can't help but feel the OP has a point. I could understand - a little! - if I was changing provider but to be charged to give my custom to the same one does seem a bit cheeky!

dunstonh

Why is it cheeky?

My sony laptop is nearly 2 years old now. Perhaps Sony should replace it with their latest model without me paying for it.

Natwest are not charging anything for them to remain with the same retail product they have now. The OP wants to buy a new retail product. So, why shouldnt Natwest charge. Natwest have incurred costs themselves in obtaining the funds via the money markets to be able to offer that rate. So, if the people buying that mortgage arent going to pay for it, who should?

mistriladi_2

Wow, is everyone here this polite?

I asked a simple question. When I refixed my mortgage 5 years ago I paid approx £350 for a 5 yr fix. It is outragous to pay £999 for a 2 year fix. I don't expect anything free and my orginal question was "is it right to be charged almost £1000 to fix a mortgage for 2 years?"

If ignorant people like you are the only ones able to offer an opinion then don't bother!

Thanks cazziebo for seeing where I'm coming from!

dunstonh

It is outragous to pay £999 for a 2 year fix.

Why?

I don't expect anything free and my orginal question was "is it right to be charged almost £1000 to fix a mortgage for 2 years?"

You original question wasnt worded like that.

If it had of been, perhaps you would have got the answer. Instead you whinged about it not being right that you were being charged for something you wanted to buy.

If ignorant people like you are the only ones able to offer an opinion then don't bother!

If ignorant people like you want to spend time whinging about things they cannot afford, then dont bother as we dont care. No-one is forcing you to buy it. Although if you took any notice of existing posts on this subject (which tend to appear weekly) you would learn how fixed rate mortgages are able to be offered and why they have charges and when it is best to use one with low fees or one with high fees.

ManAtHome

Basically they are disguising some of the interest as fees - not wrong as it's all up front and you can accept or decline.

Given the alternatives of a no-arrangement mortgage at 6.5% or one at 5.6% if you give me a grand up front - the 5.6% gets in the news(?)paper "idiots guide to money" as a best buy, but the 6.5% MAY be cheaper.

Get some other quotes, have a play with Excel or a calculator and take the cheapest total repayment over the next 2 years. Large-fee/lower rate ones tend to work out better if you have a large mortgage.

cazziebo

dunstonh wrote: »

Why is it cheeky?

My sony laptop is nearly 2 years old now. Perhaps Sony should replace it with their latest model without me paying for it.

Nationwide are not charging anything for them to remain with the same retail product they have now. The OP wants to buy a new retail product. So, why shouldnt Natwest charge. Natwest have incurred costs themselves in obtaining the funds via the money markets to be able to offer that rate. So, if the people buying that mortgage arent going to pay for it, who should?

Because if I was renewing a laptop after two years I would expect a lot more functionality than the old one (and probably the price would have gone down, not up!)

A mortgage product isn't a new product when you are staying with the same provider. I stayed with Northern Rock, all done online, yet had to pay for the privilege. they aren't giving me the money for nothing - they do charge me interest.

I think the financial services industry should take a good hard look at itself and its attitude to customers, before the regulators and public opinion force them to.

(most of the other boards are much more friendly, mistriladi)

arfster

At 5.69%, that interest probably isn't actually making them any profit, so its inevitable they'll charge a fee. It's not like you're a new customer they can afford to subsidise.

If you don't like the deals though, tell them to get stuffed and hunt around. Nationwide and Britannia both do 5yr 5.63% or thereabouts, and that's with a 500 quid fee. There are plenty other similar such ones, eg if it's a large mortgage a higher fee/low interest deal might be better: eg Britannia's 5.39% 5yr for 1000. If the mortgage is small, a no-fee deal with slightly higher interest rate might be better (eg for my almost-paid off mortgage, I'm going to Nationwide's lifetime tracker, 6.09% no fee). There are plenty others, use MSE/Moneysupermarket/moneyfacts search tools to hunt for what suits you.

Similar to your situation, my existing provider Halifax offers rubbish retention deals, so I'm off. It's just the nature of the market: they expect most people won't switch, won't do the research, will just accept what's given them. To be honest, they're mostly right - I was shocked at the garbage deals a high street "expert advisor" offered my sister recently.

dunstonh

Because if I was renewing a laptop after two years I would expect a lot more functionality than the old one (and probably the price would have gone down, not up!)

You are getting more with the new mortgage deal. Instead of getting standard variable rate, you are getting a cheaper fixed rate.

That deal has cost the lender money as they have had to go to the money markets to be able to offer that rate. Often, it is secured by borrowing the money themselves. That has a risk (Northern Rock being the extreme example for when it goes wrong). They are not offsetting the deal with savers money which is the cheapest option and why variable rate mortgages are cheaper.

A mortgage product isn't a new product when you are staying with the same provider. I stayed with Northern Rock, all done online, yet had to pay for the privilege. they aren't giving me the money for nothing - they do charge me interest.

You are buying a fixed rate which makes them virtually no money (some have been known to lose money as a loss leader) on the interest being paid. The fee can be the only place where money is made on some of these deals.

Why should the lender face a loss by wanting the "privilege" to keep your custom? What makes you so special that you think you should be sold products at a loss?

If you dont pay the costs, who is going to pay them?

sarkin

Because of the credit crunch LIBOR has rocketed and people have to pay more for the money they have borrowed. HAve a look at the mess Nrothern Rock are in. If you do not want to pay arrangement fees then take a diffrent product or speak to a mortgage broker and see what they can come up with.