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Banks need to reduce their mortgage arrangement fees

August 17, 2008 by admin  
Filed under Mortgages

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At a time when borrowing has become increasingly expensive, and when household finances have become tighter and tighter due to the global credit crunch, higher bills, increasing living costs, and higher petrol prices, the UK’s mortgage lenders have decided to deal borrowers another blow by hiking up mortgage arrangement fees, making it even more difficult for the average struggling consumers to take out a mortgage or remortgage. In fact, in the current climate some poor consumers could find themselves facing fees of thousands of pounds to remortgage or take out a mortgage, making the whole process impossible for some who simply cannot cope with that sort of fee.

Alistair Darling, the Chancellor of the Exchequer, has now picked up on this issue, and has called for banks to stop ripping customers off by charging extortionate fees. He recently revealed that he is in discussions with the UK’s financial regulator with regards to what sort of arrangement fee could be classed as a fair one, and he stated: ‘I’m very concerned that people ought to be treated fairly, especially people coming off fixed rates and going onto different rates.’ Darling also went on to state: ‘We have met the Council of Mortgage Lenders to try to reach an agreement to ensure that people are treated fairly, but if that isn’t happening I will ask the FSA to pursue the matter.’

Darling also said: ‘Everybody accepts there are costs that have to be met when they change over, but I think we have to make sure people are treated fairly and are not taken advantage of.’

However, there are indications that this simply isn’t happening when it comes to mortgage arrangement fees. Some lenders have hiked up fees by close to 100% over the past year or two, and more recently Abbey has stated that an arrangement fee of £2499 must be paid upfront by those that cannot afford to put down a sizeable deposit.

HSBC has also hiked up arrangement fees on its Rate Matcher mortgage, which was designed to help those coming off cheap fixed rate deals but could now end up costing them up to £10,000 in arrangement fees.

Of course, there are mortgages available where these extortionate arrangement fees are not charged, but with the number of mortgage products having been slashed by two thirds since last summer these are few and far between, and those with less than perfect credit or without a hefty deposit to put down may find that they are impossible to find.

In addition to rising arrangement fees many lenders have also hiked up the cost of mortgages via interest rates, and one Halifax official said: ‘Over the past few weeks, most major lenders have increased their pricing on a number of occasions. Wholesale money is very expensive. Unfortunately, increased costs have to be passed on to new customers by banks and building societies.’

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Tags: extortionate, Mortgages, UK's financial regulator, fsa, current climate, issue, matter

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  1. Food prices continue to soar says:
    August 18, 2008 at 2:33 pm

    [...] Banks need to reduce their mortgage arrangement fees [...]

  2. Consumers still having to pay high deposits for affordable mortgages says:
    October 7, 2008 at 9:08 am

    [...] particularly first time buyers. Many lenders have been pushing up borrowing costs, including increasing arrangement fees on mortgages and pushing up the amount of deposit required for a reasonable rate of interest on the [...]



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