OFT should investigate rip-off mortgage fees

I don\'t want to sound like a broken record but mortgage fees are a cast iron rip-off. Don\'t get me wrong, I think anyone who provides a service is entitled to be paid for it - lenders and brokers included.

But the fee has to be reasonable. Let’s face it we are not talking about a lengthy or difficult process here.

So when I heard that First Direct was dropping the fees on its offset mortgages I cheered loudly. Only to stop cheering and start stamping my feet in frustration when I saw that it was just another short-term stunt to grab a few new punters rather than a sudden realisation that the whole fee structure of mortgages is based on shameless profiteering.

I’ve made this argument before and it still stands. Lenders claim that mortgage fees represent the costs incurred by them but that cannot be true if the fees can be dropped on a seasonal whim to spice up competition. Either they represent a legitimate expense that needs to be recovered by lenders or they do not.

If they are legitimate, how come there is such a wide discrepancy between what is charged by the cheapest lender and what is charged by the most expensive?

And again, if they are leg- itimate, how is it that lenders can afford to axe them as a marketing ploy?

First Direct is not the first lender to do this, Intelligent Fin-ance dropped its fees for a few months earlier this year.

Let’s look at lenders’ costs in a bit more detail. First Direct – which claims to be this country’s most recommended bank – is offer- ing its variable rate offset mortgage free of arrangement and application fees, giving customers a saving of up to 599. That’s a fortune. You’d have to work 119 hours to earn that before tax on the minimum wage.

First Direct might think it is being generous deducting the fees from applications made before July 12 and completing by September 30, but it should be ashamed that it has been regularly fleecing its customers of this cash.

What exactly do clients get for their dough? Apparently a 299 arrangement fee and 300 external valuation fee. Most valuations are now desktop or drive-by – they take five minutes as someone ticks the right boxes on the paperwork. For 300 you could do a drive-by valuation while supping champagne in a chauffeur-driven limo. The 299 arrangement fee is also a joke. For that clients should get a gold plated Key Facts Illustration thrown in.

The Office of Fair Trading could not get banks to properly justify the 20 or 25 they charged for late credit card payments and surprise, surprise the penalties have suddenly fallen to 12 to kill off that inquiry.

Perhaps the OFT should turn its attention to mortgage fees now that it has won the credit card battle and see how quickly lenders chop these in half to avoid further scrutiny.