Mortgages Section

More On Those Nasty Mortgage Fees

October 2005

The Financial Service Authority (FSA) is looking at up to 5 mortgage lenders for charging excessive fees, fees which can't really be justified and are seen as nothing more than either profiteering or designed to deter customers from switching to other lenders.

How These Mortgage Fees Levied

• Basically they're charged when borrowers switch to another mortgage, the fees have increased from an average £100 to in some cases £300+ in little more than 2 years
• These fees are not similar to redemption penalties, in fact they are even levied at the end of a short term deal
• Another gripe the FSA has is that lenders can change these fees at their discretion, so a client can signup today with possible fees of £100 written into the small print only to find they've been increased to £400 at some stage in the future
• The FSA has ordered firms to justify their charges - or cut them

How Critical Are These Charges

High charges are now possibly more important than the interest rate! Look at this example

• The Portman Building Society's 2 year rate at 4.15% versus Abbey's 2 year deal at 4.39%
• Over 2 years (on a £100,000 mortgage) the Portman deal would cost £9,349 while the Abbey mortgage with the more 'expensive' interest rate would cost £9,079
• The reason is simple, it all comes down to fees

Summary

The banks and mortgage lenders have found both new ways to profit from their customers alongside making it expensive to clients that want to move their business. Therefore, expect far more of these games and tricks to be played.

Potential mortgage buyers should ignore these charges at their financial peril. Possibly the worst mistake at present is to look at just the headline interest rate offered. Get smart to get the best deal, do some research and then look at ALL of the costs involved. Only by working in this fashion will you be able to spot and get the best mortgage deals.

See Also

• Considering Remortgaging - What To Do
• Why You Should Always Use a Mortgage Broker
• Find's Mortgage Broker links
• Find's Mortgage Lender links