Arrangement Fees Go Through The Roof
As mortgage providers strive in the competitive environment to appear to offer the best deals they are keen to highlight a low headline rate of interest. Unfortunately, in doing so, in recent years they have bumped up arrangement fees so that they have gone up by more than 10 times in the last four years. The banks and building societies have seen these fees as a great way to boost profits in light of reducing penalty charges and the need to keep rates for fixed, discounted and tracker mortgages at an attractive level.
A few years ago arrangement fees tended to be around the £300 mark. Intelligent Finance (IF) now have an arrangement fee of £2,999. They defend it as it is a lifetime tracker with a reversion rate at 0.62% above base rate, but they offer a range of rates and options including loans with zero percent fees.
IF’s is the highest fee, at £2,999, with a start rate of 5.39% until 1 September 2009, and a maximum loan-to-value (LTV) of 90%.
Dunfermline Building Society has a 5.75% variable rate for the whole term of the mortgage for a fee of £1,999 and a maximum LTV of 110%.
Skipton Building Society’s £1,999 fee comes on a 5.79% fixed rate until 31 August 2012 and a 75% maximum LTV.
The Council of Mortgage Lenders commented that some mortgages have no fees at all. They said that in general there is a trade-off between the fee and the interest rate. For those with small mortgages it is probably better to opt for a lower fee and a seemingly less attractive rate.
Scottish Widows Bank offers a 5.89% rate fixed until 30 June 2010 for a fee of £1,999, and a maximum LTV of 95%.
Northern Rock also has a £1,999 fee on a 5.59% fixed rate until 1 March 2009, with a maximum LTV of 85%.
Woolwich has a very slightly lower arrangement fee of £1,995 on its 5.59% variable rate for 2 years. The maximum LTV is 85%.
IF has another option of a 5.44% variable rate until 1 September 2009. The fee for this is half its other one at £1,499 with a maximum LTV of 90%.
Mortgage brokers do suggest to homeowners that they should not be taken in by the headline advertised interest rates, but to take time to calculate what they will be spending, including any fees, to get the true cost of their loan.
Some providers have fees which are based on a percentage of the loan.
Northern Rock offers a 4.79% fixed rate until 1 September 2009 for a fee of 3.5% and a maximum LTV. If you took out a mortgage of £100,000 that fee would be a whopping £3,500.
Cheltenham & Gloucester has a 4.99% fixed rate until 31 July 2009 for a 2.5% arrangement fee and a maximum LTV of 90%
Finally, Bradford & Bingley also offers a 4.99% fixed rate for slightly longer, to 31 October 2009, and with a slightly lower fee of 2%. Maximum LTV is 95%
15th July 2007