The Financial Services Authority’s recent warning that lenders must reform their settlement fee structures could lead to a big hike in arrangement fees, says Moneynet.co.uk.
The price comparison site says punitive measures handed out to banks and building societies to put a stop to over-inflated fees and charges may give the impression that the tide is turning in consumers favour.
But profit-driven lenders will have to find other ways to recoup revenues and that can only come from customers pockets, it adds.
Richard Brown, chief executive of Moneynet.co.uk, says: Much has been made of lenders having to reduce their exit fees now they will be looking at other ways to make up the shortfall.
As this lucrative revenue stream dries up to a trickle and sizeable sums are handed out in refunds to former customers, I believe that we will see an increase in arrangement fees being charged at the outset and that more lenders will adopt dual pricing policies.
“Mortgage lenders are masters at making their mortgage products difficult to understand and as confusing as possible.
“An increasingly popular trend is for lenders to offer different rates depending on how much arrangement fee the borrower is prepared to pay up-front.
“In other words, the more you pay as an up-front fee, the better the rate they will offer you.
“If you are being offered an unusually competitive rate then there is probably a catch and you need to check all the terms and conditions of the product.
“Lenders are required to issue a key features document before you sign up which will detail all the terms and conditions of the product they are selling you. If you donĦt read it before signing, you could well be in for a nasty shock.
If in doubt, consult an independent financial adviser or mortgage broker who will be able to do the sums for you and make the recommendations.