Arrangement Fees Are Getting Higher
People coming off fixed rate mortgages from two and three years ago will get a shock with the level of mortgage arrangement fees now. It is important to shop around and take advice to avoid the worst of the fees.
Mortgage lenders are increasing their fees as well as their interest rates. Comparison website MoneyExpert.com has carried out research which shows that arrangement fees can reach a staggering £5,000 for homeowners seeking a new loan.
Its research shows that 21 months ago, in September 2006, the number of fixed-rate mortgages with fess of £750 or more numbered just 22. Now, however, that number has gone up nearly fifteen-fold to 323. The credit crunch has had a huge impact. It is not just the number of fees, but the size of them. In September 2006, the average fee was £517, but it is now £860.
Abbey makes one of the biggest mortgage arrangement fee charges. Abbey is the third-largest mortgage lender in Britain, and it has a charge of £2,499 on its five-year fixed rate of 7.04%. In addition, the bank is not allowing people to add the fee to their mortgage – a standard practice in most cases – if the loan-to-value of the mortgage is greater than 85%.
This apparently bad situation may actually be worse. As the survey only looked at fixed-rate mortgages and expressly-mentioned fees (when the lender stipulates an exact amount that will be charged), there are other lenders not accounted for who charge a percentage of the loan amount. Such percentage fees can easily run into thousands of pounds for large loans.
Stamp duty has also reached an average of £4,950 per property, making home moving an expensive activity.
Many homebuyers who have not fixed their mortgage for two or three years will find the new level of fees quite a shock. It is important that they get the best advice from a mortgage advisor or broker who will be able to assess the market and come up with a range of mortgage options, which will help the borrower avoid the worst of the fees.
