|
BankruptcyNews
Junior Member
358 Posts |
 Posted - 20 March 2007 : 10:37:38
|
The rise of the £2,500 mortgage fee
Homebuyers are being hit by soaring charges for mortgages which have nearly doubled in just three years, research reveals today.
Some lenders are charging an 'arrangement' fee of £2,500 simply for taking out a fixed rate home loan.
Banks and building societies have been accused of boosting their profits by raising the fees, which can wipe out savings from lower interest rates.
But the research, from the consumer finance website Find.co.uk, reveals how the arrangement fees have gone up at an inflation-busting rate.
In February 2004, the average fee on a fixed rate mortgage which lasted for between one and five years was £334.
Today, that figure is £611, an increase of 83%. Fees of £1,000 or more are common.
A spokesman for Moneyfacts, the financial information firm, said: 'There could be a bit of profiteering out there. Some lenders have kept interest rates low but pushed up the fees.'
Some lenders charge a percentage of the whole loan rather than a fixed fee - which can work out even more of a burden.
For example, one bank charges 3.5% of the loan which is £5,250 on a £150,000 mortgage, the average loan currently taken out.
Anyone who adds the cost on to the mortgage, rather than pay the fee up-front, will also be charged extra interest.
The problem with the higher fees is that homeowners can be misled into thinking they are getting a cheap deal because the interest rate is low. That rate earns the mortgage a starring appearance in the 'Best Buy' tables - even though any savings are cancelled out by the high fee.
David Black, head of banking at Defaqto, a financial products research firm, warned: 'Lenders can manipulate their positions in Best Buy tables because they are generally based on mortgage interest rates only.
'So, by increasing arrangement fees and not the interest rates, lenders effectively increase the true cost of the mortgage. Consumers need to take account not only of the headline rate, but also the application fee at the outset.
'If you have a small mortgage, the application fee will effectively boost the true cost quite considerably.'
The fees have been increased by lenders partly in response to the Bank of England's decision to raise interest rates three times since August. The base rate has jumped to a six-year high of 5.25%, and another rate rise could be on its way.
The charges are also a way of recovering some of the money lost after lenders had to pay compensation for another fee - to leave a mortgage. Homeowners can claim up to £200m compensation if they paid an exit fee in the last few years, which was higher than the level of the fee when they took out the mortgage.
Many want to fix their mortgages because they fear they will not be able to afford their monthly repayments if rates go up again. By taking a fixed rate, they are buying the security that their monthly costs will not change during the loan, typically two or three years.
SOURCE: Becky Barrow, Daily Mail
20 March 2007
See my Blogs:
http://bankruptcynews.blogs.bankruptcyhelp.org.uk |
|
The rise of the GBP2,500 mortgage fee
