Higher arrangement fees in place for mortgage borrowers
At a time when the financial climate is already extremely difficult, and many consumers are struggling financially, lenders have hikes up the arrangement fees on their mortgage by an astonishing level in some cases, leaving those that are looking to take out a mortgage or remortgage really struggling to cope with affordability. Recent reports show that some borrowers could now be facing mortgage arrangement fees of thousands of pounds.
Just two years ago there were only 22 mortgages that charged arrangement fees of over £750 but this number has now rocketed to 300 providers.
The average arrangement fee on a mortgage is now £860, up from £517 just two years ago. This is just one of the many charges that have rocketed over recent months, as the global credit crunch continues to wreak havoc in the financial markets and lenders continue to pass various rising costs on to borrowers.
One industry official said: ‘Such high application fees will come as something of a shock to many homebuyers. We’re just not used to these levels. The days of fee-free mortgages are over and frankly getting anything under £1,000 is something of a coup. With stamp duty reaching an average of £4,950 per property, moving home is becoming more and more expensive.’
The Abbey recently announced that for those unable to put down a substantial deposit, which is most likely to be the average first time buyers with no previous property from which to take equity, there would be an arrangement fee of around £2500 on its five year fixed rate mortgage, and this would have to be paid upfront rather than added to the mortgage. HSBC has also recently announced that the arrangement fee on its popular Rate Matcher mortgage is doubling in some cases, which means that some borrowers could find themselves lumbered with a whopping £10,000 fee.
An HSBC official said: ‘We were left with a choice of pulling the offer or increasing fees.’
In the meantime, the Chancellor of the Exchequer, Alistair Darling, is looking into the huge hikes in arrangement fees, and has warned banks to stop ripping off consumers. He has also been discussing the fairness of arrangement fees at their current levels with the financial regulator, the Financial Services Authority.
Darling said: ‘I’m very concerned that people ought to be treated fairly, especially people coming off fixed rates and going onto different rates. 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.’
He continued: ‘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.’
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