Arrangement fees - Halifax

dunstonh

post #7 on that thread leon linked explains it.

You need to stop focusing on admin costs at branch level. That hasn't changed much although FSA regulation and authorisation has made mortgage provision more expensive than it used to be. The costs are financing and arranging the fixed rate on the money markets.

You may heard that we have a credit crunch and lending is harder to come by.

Bun

I you are insistent with staying with the Halifax, work out how much you will pay for a higher rate with no fees. We had to do this for personal reasons, and found that we still got a good deal in that a rate rise was negligable for us, and worked out much cheaper for our smaller amount over two years than it was to reduce the interest rate and have fees.

eldowardo

Doesnt this website encourage people to challenge the system. Council tax rebates is a classic one. All this poster was doing was moaning about the arrangement fee, and this website encourages it. Ive noticed the financial advisors are siding with banks on this one, maybe cos some of them get a nice little cut and the fee helps pay for some of this...

dunstonh

Doesnt this website encourage people to challenge the system.

It doenst encourage people to complain about valid retail charges. There are good reasons why a number of the things covered on this site are looked at but fixed rate arrangement fees are not one of them. A lot of people are far better off with these larger fees than they were with the lower fees.

Ive noticed the financial advisors are siding with banks on this one, maybe cos some of them get a nice little cut and the fee helps pay for some of this...

Wrong. As an IFA, I dont do mortgages so dont earn anything from it. Also, the remuneration mortgage advisers get is identical on variable rates with no upfront arrangement fees so there is not a penny extra being earned by a mortgage adviser.

eldowardo

but someone is saying they think the arrangement fees are disproportionate to the actual costs. thats the same scenario as bank charges. but people stood up and those charges are now being challenged in Court.

as an ifa who doesnt do mortgages then that wont apply to you, but some do, and I still think they get some form of commission, which the arrangement fee helps to pay them off!

KTF

The arrangement fee is not proportionate to the actual costs, it is a fee for a product i.e. a bottle of coke costs the same to produce but you pay different amounts based on the brand and what you feel the benefit is to yourself.

As with any product, if you dont like the cost then you are free to shop around and pick another offering.

IFA and mortgage advisors do get commission from the lender but then they do a lot of work in sorting the deal out, getting all the paperwork together, chasing it up, etc. Do you expect them to do this for free?

eldowardo

no - u dont expect to do it for free. but then this is what I said earlier, the fee helps pay off these advisors to a degree - and so financial advisors will side with banks cos it helps pay them off

if u look at the mortgage as a product then yes I see your point, but it still penalises people - its the same money, your having to pay for the privlidge of cheaper interest.

luckyfool

eldowardo wrote: »

no - u dont expect to do it for free. but then this is what I said earlier, the fee helps pay off these advisors to a degree - and so financial advisors will side with banks cos it helps pay them off

if u look at the mortgage as a product then yes I see your point, but it still penalises people - its the same money, your having to pay for the privlidge of cheaper interest.

Different banks offer different products, in fact many banks offer a range of rate and fee options.

e.g. Halifax might offer a 5.6% rate with a £1999 fee, a 5.7% with a £1499 fee, a 5.9% with a £499 fee, and a 6.1% rate with no fee at all.

It's about choice, the OP can choose the get the best rate on the market and pay a high fee for it, or they can go for a fee free deal with Halifax or another lender and in all likelihood pay a higher rate. If their mortgage is £40,000 then it makes much more sense to go for a fee free deal at the expense of a higher rate, if their mortgage is for £500,000 then a £1,499 fee can be a relatively small price to pay to get a significantly lower rate. A true cost comparison over any incentive and tie in periods is the only way to definitively identify the best deal for an individual customer.

dunstonh

as an ifa who doesnt do mortgages then that wont apply to you, but some do,

The term IFA doesnt exist for mortgages. IFAs are investment advisers. Some IFAs (and its getting less and less all the time) do mortgages but they do it with a mortgage adviser hat on and not IFA. A lot of IFAs, myself included, employ a mortgage adviser.

I still think they get some form of commission, which the arrangement fee helps to pay them off!

The arrangement fee doesnt pay the adviser. If the adviser arranges a variable rate costing nothing or a fixed rate costing £1000, the adviser doesnt get a penny of that £1000 and the remuneration is the same.

but someone is saying they think the arrangement fees are disproportionate to the actual costs. thats the same scenario as bank charges.

Its not at all similar. Penalty charges have to be justified but retail charges do not. A Ferrari may sell at £150k but how much more than does it cost to make than say a mid range BMW? or even a top range ford?

A retailer can more or less retail at what they like (there are some restrictions).

As for why the costs exist on fixed rates, it helps to understand what is required and the other thread explains it.

eldowardo

I cant help but notice that the people saying arrangement fees are necessary are people in the trade, their signatures give them away

to the regular person in the street they are another way of making money by the banks - they are disproportionate - I dont believe any member of the public is happy about paying them, even if they have a £50k mortgage or a £500k one.