The Chancelor Alistair Darling criticised mortgage lenders this week, over the size of mortgage application fees claiming they are “taking advantage of homeowners”. He 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 through no fault of their own.”
The Council Of Mortgage Lenders responded by saying “No-one has to pay an arrangement fee, as fee-free deals still exist. Fees vary between lenders and there is still a wide choice between mortgages with lower arrangement fees (and a potentially higher interest rate), and those with higher fees (often with a lower interest rate). Constraining the market to offer products priced in only one way would be detrimental to customer choice."
While there is no doubt that mortgage arrangement fees have risen sharply, essentially borrowers face the same choice now as they have done for the last few years. There will be an array of mortgages on offer, both fixed and variable, and the different schemes will have different rates and different fees, even with the same lender. This only reinforces the message above that borrowers need to do their homework, taking into account all aspects of the scheme.
The Halifax and Bank of Scotland group have announced that from 29th June they will introduce a new fee across their entire mortgage range. The “Mortgage Account Fee” is set at £245 (for Halifax and Bank of Scotland customers), and is in addition to any existing product fee.
This is bad news for borrowers, and comes at a time when lenders are charging more than ever to arrange a mortgage. The fee will be debited to the mortgage account at outset, although it is not interest bearing.
HBoS claim it is to cover the setting up, routine maintenance and closing down of the mortgage account and is less than the total of the mortgage exit fee they removed last year plus a number of post completion service fees now also being removed.
The mortgage exit fee removed less than 12 months ago was £225. As yet, it is still unclear what post completion service fees are being removed.