Application Arrangement Fees - Mortgages!

KTF

Some lenders charge lower fees (or a different rate) for new customers in order to attract new business. I have looked at the Woolwich website and the fee is probably to cover the administration for moving deals. As has been said before though if you dont like it then you are free to move (assuming you dont have any extended tie ins). You get nothing for loyalty and the mortgage market is competitive so its worth looking around.

Everyones 'best' is different which is why its hard to say that a particular deal will suit you when it worked fine for someone else. This is why there are brokers who will take your details then suggest X or Y based on your circumstances. From looking at the Woolwich website and the fees I assume you are looking at trackers? If you dont feel comfortable using brokers (remember that some of the better rates may be only available to brokers) have you looked on moneysupermarket.com (or similar) and entered your details to see what other deals are available? Many lenders (such as Halifax or Nationwide) will even pay your remortgage costs for you as they are keen to attract new customers.

Miss_Penny_Pincher_2

Hi Snax - I agree that the £100 extra fee for existing customers is a disgrace!

I can vouch that not all banks do this - I'm with the Nationwide and they actually offer reduced fees if you are already a mortgage customer which gives the impression they value customers. Actually I'm about to get a new mortgage offer with them which for new customers they charge an arrangement fee of £499 but for current customers they are waiving this charge and also not charging the usual exit fee of £90 either so to change to the new deal is fee free.

When I first heard in the news that Nationwide were going to treat their existing customers worst than new customers I was disgusted but I have to say now that I'm happy with this deal

snax0

Thank you! I'm so glad someone is on my wavelength...

I was beginning to think all the other forum users were bank owners!

beingjdc

£100 extra isn't much when they could just turn round and say "actually, we're only offering you our SVR in future", costing you probably an extra 2k a year. Expect more of that as people find themselves in negative equity and can't move provider if they don't like the deal they get.

I'm with the majority here - the fees are steep, but it's a marketing device to make the interest rate look low. There are plenty of deals with a low or no arrangement fee, but you pay for it in the interest rate. Take your pick.

MarkyMarkD

£100 as a mortgage review fee is far less than the exit fee and far less than it would cost in legal and valuation costs to remortgage elsewhere. They charge it because they can and because people are willing to pay it.

Like it or lump it - or pay the SVR rate you agreed to pay after your introductory 2 years, or whatever.

It's your choice.

As I (and others) have posted before, almost all fixed rate and discounted/tracker rate mortgages are actually loss-making for the lender, taken on the rate alone. It's only fees that make the lender profitable overall.

dunstonh

the fees are steep, but it's a marketing device to make the interest rate look low.

Some of the providers have two rates available. One with a low charge but higher rate and another with a high charge and a lower rate. Obviously the latter suits the larger mortgage. If a lender only has a high charge and a lower rate then it would indicate that they are targeting large value mortgages. That doesnt make their deal a rip off. It just means it is not suitable for you.

Perhaps I was wrong and the huge hike in mortgage arrangement fees are to pay brokers and financial advisers?

Mortgage advisers get paid the same from that lender regardless of deal. The money isnt going into their pockets. As you have read the other threads, you would now realise that the profit is being moved into charge and not the interest rate. Many people believe that the banks profit from the interest rate but that is not always the case. Especially on fixed rates.

As it happens I have spent the last 17 years working for a commercial vehicle retailer

Mortgages are a retail product. If someone was sold a vehicle can returned 2-3 years later wanting a new vehicle would you give it to them free of charge? Buying a new fixed rate is a new retail product.

UK007BullDog

I wished I was a fat cat but sadly I am not. I am a paid employee and would only get a bonus if I hit target of sold required mortgages per month. I am still waiting to hit target.......

MarkyMarkD

Dunstonh: Whilst I agree with you on almost every subject, you are missing (one aspect of) the OP's point in your final paragraph, which is being charged an existing customer "mortgage review fee" as well as the product fee applicable to the new product.

(The remainder of this post isn't aimed specifically at Dunstonh but back to the OP):

The OP's arguments make some sense - it costs more to underwrite a new application than to process a product switch which isn't underwritten at all.

But the point the OP is missing is that people switching mortgage products are always losing the lender money compared to them staying on the deal they originally signed up to. That's why lenders aren't (generally) bending over backwards to give product switchers amazing deals.

Those who do - like Nationwide referred to above - are running their business on a strange business model. Indeed, ironically - given Nationwide's blabbing on about mutuality and fairness - many of their strange business policies involve giving money from their more dopey customers to the more astute ones. On mortgages, those paying Nationwide's BMR subsidise those getting super-value product switch deals (i.e. the more astute). On savings, those taking up Nationwide's ludicrous loss-making savings specials for longer-term members are being subsidised by those who can't lock up their money for the requisite time.

You can look at any lender's business model and pick holes in it. But as Dunstonh says, no product is inherently a rip off - it may be perfect for one borrower's circumstances, and rubbish for someone else's.

A friend of mine at work has bought a mortgage - a product switch from his existing lender, in fact - with a huge £2,499 fee. People are amazed that he's done it. But he's done it because it suits his own personal circumstances - he's added the fee to the loan, and he has kept his repayments down as low as he possibly can. He definitely is NOT getting the lowest true cost - and hence, some would say that the mortgage product is a rip-off. But he definitely IS minimising his repayments over the two year term of the product, and that, for him, is the most important thing.

One man's rip-off is another man's consumer choice. So back to what I said before - it's up to each borrower whether they are happy to pay the fees demanded to switch. If they don't want to, they can simply stick to their original deal which is what they signed up to in the first place.

eldowardo

these fees generally are disgusting and its nice to hear someone saying so... in one of those threads I got slated by some of these that have an interest in the business and get a cut of the deal even though they deny it x

dwsjarcmcd

eldowardo wrote: »

these fees generally are disgusting and its nice to hear someone saying so... in one of those threads I got slated by some of these that have an interest in the business and get a cut of the deal even though they deny it x

If you don't like them, then don't pay them. There are plenty of alternatives out there, fee free products, fee assist products etc. You may not like it, but without these fees, you would just pay more on the rate, simple as that.

As I said, if you don't like, don't pay them, pay a higher rate instead.