Mortgage arrangement fees rocket

Published 13th Jun 2008

The number of fixed-rate mortgages with hefty arrangement fees has rocketed as lenders vie to shore up their margins, figures show.

Those with charges of 750 pounds or more have soared 14-fold in the past 18 months, according to price comparison website MoneyExpert.com.

The research comes a day after Abbey, Britain's second-largest mortgage lender, said it would no longer allow borrowers with small deposits to add the cost of arrangement fees to their home loan.

A total of 323 fixed-rate mortgages -- 34 percent of the total fixed mortgage market -- have fees of 750 pounds or more.

That compares to just 22 in September 2006, before the credit crunch hit the UK.

During the same period, average application fees on fixed-rate mortgages have risen by 66 percent -- from 517.19 pounds to 860.25 pounds today.

Meanwhile, the highest fixed fee has doubled. A year and a half ago, Halifax charged 1,499 pounds on its two-year fixed rate for homeowners with a 25 percent deposit or more.

Today, it charges 3,999 pounds on a three-year fix for existing customers with homes worth between 500,000 and two million pounds.

Sean Gardner, director of MoneyExpert.com, said: "The days of fee-free mortgages are over and, frankly, getting anything under 1,000 pounds is something of a coup.

"Lenders are sick to death of risky borrowers and they won't be taking any chances in the near future.

"That means high fees, high interest rates and very little manoeuvrability when it comes to negotiating your mortgage."

Thousands of mortgage products have been withdrawn from the UK market since the credit crunch took hold earlier this year.

Lenders have scrapped cheap, fixed-rate deals, introduced higher-rate products and cut the maximum amount people can borrow in relation to the value of the property.

But, more recently, lenders have lowered some rates -- particularly for those with large deposits to put down -- as they try to boost competitiveness and increase market share in the face of the credit crisis that has seen the mortgage market shrink considerably.

Jennifer Hill

Source: ' Reuters '

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