Arrangement Fee...Justify!!

Dan_Collins_2

Gorgeous_George wrote: »

I tend to agree with dunstonh (as always). However, what seems unfair is that a borrower of a small sum, say £30K pays the same fee as one borrowing £500K.

Now, if the bank/building society have arranged a £500million fixed rate fund they will make more money by having lots of smaller borrowers (and I don't mean pygmies/dwarfs etc.). Maybe the arrangement fee should be proportional to the amount borrowed.

GG

Maybe the lower mortgage should pay more in the way of a fee as the lender will earn less interest!

PasturesNew

The same amount of work is required no matter how much you borrow.

And usually in the world it is those spending most that get the biggest discount. So maybe you are getting it cheaper if you look at it that way as somebody borrowing £500k also has to pay the same fee.

dunstonh

Its probably set by base on data from actuaries. i.e. they expect the average mortgage to be £x amount and if they have £y amount available to lend at that rate then that means there will be approx z number of applicants. Therefore the fee is averaged to reflect that.

Gorgeous_George

I guess it's like a manufacturer with a million widgets to sell. £1 each to a man buying 100,000 and £2 each to anyone wanting just 10.



GG

lae150

The same amount of work is required no matter how much you borrow.

What work do you mean though exactly? We went through a financial advisor to get our mortgage and had to pay a £999 arrangement fee. So exactly what work at Nationwide doing for that money cause i don;t see how processing a loan and sending out a letter justify a charge of that much.

dunstonh

So exactly what work at Nationwide doing for that money cause i don;t see how processing a loan and sending out a letter justify a charge of that much.

Read the thread and you will see.

PasturesNew

lae150 wrote: »

What work do you mean though exactly? We went through a financial advisor to get our mortgage and had to pay a £999 arrangement fee. So exactly what work at Nationwide doing for that money cause i don;t see how processing a loan and sending out a letter justify a charge of that much.

Yeah ... read the thread above.
It was all explained

dwsjarcmcd

The amount of work has nothing to do with the size of the fee. It is about a couple of different issues

Competativeness - The 'best buy' tables and comparison websites primarily base their rankings on the rate, therefore the greater the fee the less the rate. These are the primary drivers for all lenders therefore they need to structure their products to fit these tables/sites.

Profitability - As dunstonh as said, lenders don't make money via the rate (or didn't until very recently) in fact they made a loss. Their margin comes from the fee and cross sales (insurances).

If there is to be a change in the way lenders price their mortgages then the starting point should be to change the way these best buy tables and websites work to rank on the cost over the benefit period by the total cost payable, including all fees, and taking into account daily/monthly/annual interest charges etc. so it would be transparent to the customer what they are comparing.

jonewer

I am always amused by these kinds of threads.

If you dont like the price of the product then dont buy it.

No company has to "justify" the price of their product to you any more than you have to "justify" taking your business elsewhere, if you so wish.

Gorgeous_George

Maybe they should offer a £100K mortgage at 0% with a £80K fee.



GG