Lenders are hiking arrangement fees to offset cost of lower rates
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Lenders are trying to offset the costs of cheaper mortgage rates by increasing arrangement fees, according to industry commentators.
Research by Moneyfacts.co.uk published last week shows that the average mortgage arrangement fee increased by 17% between August
2010 and August 2011, up from £879 to £1,030.
A spokeswoman for Moneyfacts, says: “Lenders appear to be off-setting the low mortgage rates on offer by increasing the arrangement fees as they battle to offer the lowest headline rate.”
Melanie Bien, director at Private Finance, says product rates are a lot lower now than a year ago and lenders are having to recuperate some of the costs through higher fees.
She says: “Consumers who look at best buy tables could be misled as all they see is the headline rate and many will be in for a shock when they see how large the fees are.”
Andrew Montlake, director at Coreco, says lenders are becoming more focussed on getting to the top of best buy tables.
He says: “The arrange ment fee used to be a byproduct of a mortgage, but it is now becoming an integral part of the rate itself. It can be difficult for consumers to work out the true cost of a product, which is where a broker can help.”
Moneyfacts says the highest fee on the market is currently £3,800, for a product offered by Accord Mortgages, while Precise Mortgages charges the highest percen tage arrangement fee at 2%.
The Accord product is a five-year fix at 3.64% up to 75% LTV, for loans between £750,000 and £1.5m.
An Accord spokeswoman says: “This is a specialist product for larger loans and is not easy to compare with other deals as it targets a specific
group of bor rowers and works out considerably cheaper than similar deals with a percentage fee.”
The research reveals the average fee increased by 3%, or £28, between July and August this year, while there are 357 products available
with no arrangement fee, equating to 12% of all mortgage deals.
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