Mortgage Arrangement Fees

karen69_2

Yes I thought the fees were too high when I signed up but
a) I was under pressure to sign quickly because my old mortgage had come to the end of the fixed rate
b) I don't think my financial advisor was very good and didn't give options he merely applied online for the mortgage I had found rather than searching for better alternatives

I'm not merely jumping on the reclaiming band wagon at all

minimike2

If bananas were 90p / lb in Tesco, but 40p / lb in Asda, where would you buy your bananas?

Would you write to the OFT complaining that Tesco were being outrageous and ripping people off?

But then, when you looked at the bananas and saw that the ones in Tesco were nice and firm and just ripened, and the ones in Asda were bruised and squidgy, would you decide that actually the 90p / lb bananas were actually better before shouting accusations about going to the regulator?


The point I am trying to make is that you claim to not unsderstand financial products, yet are happy to shout "!!!!!! Turpin" from the rooftops and go on about FSA investigations about something you admit you do not understand.

In my post number 4, I tell you that the fee is a feature of the mortgage that you can chose not to pay by taking a fee free product. You pay a fee in return for a reduced interest rate. Or you dont pay a fee and get a higher interest rate. You work out (or your broker works out) which is most cost effective and go with that option. Luckily, in the mortgage scenario, the second option isnt a bruised sloppy banana rather than a nice firm ripened one, its just a different product.


Or of course you could just stay on Standard Variable Rate......

It does seem like the old "CLAIM BACK FEES OH MY GOD EVERYONE IS BEING RIPPED OFF" bandwagon at work to be honest.

dunstonh

We have recently been charged more than £900 in fees for our mortgage and I have just looked at their website to find they are now charging £1499!!!

Good. Its nice to see those with larger mortgages get the choice.

I think the fees are too high - my opinion

I think a Ferrari costs too much but there is f all I can do about it. My opinion on that is as worthless as yours is with mortgages.

I think the FSA should look into it - my opinion

Luckily some of those at the FSA have an understanding of economics and know why these fees are charged.

a) I was under pressure to sign quickly because my old mortgage had come to the end of the fixed rate

Perhaps you should have spent a bit more time on a very important matter.

b) I don't think my financial advisor was very good and didn't give options he merely applied online for the mortgage I had found rather than searching for better alternatives

Execution only is more common at present due to concerns over liability. Its more common with tied agents rather than independents.

At the end of the day you could have bought a fixed rate at a lower charge but higher rate but YOU CHOSE TO BUY a lower fixed rate at a higher charge. One assumes you costed these deals over the 5 year period or whatever you chose to see what was best.

And no, I am not a mortgage adviser and I dont do mortgages but I know the economics involved in getting fixed rates financed and the fees are justifiable at their current level at this time as well as giving choice.

karen69_2

That's it - I shan't bother posting any more. I feel like I'm being 'attacked' for opening my mouth.

Consider this thread ended.

Tiddler_2

Hi Karen,

Unfortunately this question is asked probably at least half a dozen times a week, hence why some of my learned colleagues get a bit tetchy on the subject - because it seems that everyone wants everything for free and when they don't get it they feel they've been ripped off.

As minimike says the fee is part of the product pricing.

The mortgage company - I'm guessing Halifax in your case, buy the mortgage funds at a certain price, work out what profit they need to make on the deal over the fixed rate period and then work out the combination of fees/rate they need to charge to make that profit.

A very basic example may be that they want to make a £1000 profit on a deal over 3 years - so they buy the money at 6.5%.

Now on a £100k mortgage if they charged 7% they would make their profit 1.5 times over, but no-one would buy the deal. So they price the deal at 6.5% but charge a £999 fee.

An alternative may be to charge 6% (now making a loss of £500 p.a on the rate) but charge a fee of £2500 to achieve their target profit. The fact that they get the fee as a lump sum means they actually make a bigger profit as they can reinvest the money.

Now it is your brokers job to work out which of the deals is better for you. If you have a small mortgage the lower fee option is usually cheaper - for bigger mortgages then it may be worth paying the larger fee and having the lower rate.

When you went to your broker, he should have looked at the options available through your current lender, and the rest of the market that he/she deals with to work out what is the best deal for you. He would take into account any fees for moving your mortgage to a new lender, and presumably how much of a hurry you are in to get the deal done, due to your fixed rate ending - moving to a new lender may take 6-8 weeks to go through so you could have been paying for 2 months at the standard variable rate.

Ideally he should explain the cheapest deal (if there was one cheaper) but explain why he is recommending you stay with Halifax.

mitchaa

Karen, the simple answer to your question...

Your arrangement fee is buying an interest rate.

Higher arrangement fee = smaller interest rate
Smaller arrangement fee = higher interest rate

There's nothing wrong with this at all, and when you look into it, a 6% interest rate with a £500 fee may work out cheaper than a 5% interest rate with a £1500 fee.

payless

Of course if it was agreed to be unlawful ( which it is not) the standard compo arrangement is to put you back in the position your were at.

You get your fee back, less what yoiu have saved if you were on SVR
and of course stay SVR

If you feel this would have been financially beneficial then you should not taken the deal- if you took advice then again query with adviser if the deal did not save you money ( or/ and offered you security of fixed rate) as comapred with SVR