Halifax Mortgage - and others no doubt

Mortgage fees soar 600% in two years

Sean Poulter and Ben Farmer, Daily Mail
17 July 2007

Homebuyers are being lured into taking up what appear to be good value mortgage deals only to be stung with huge fees.
Some leading lenders have increased their arrangement fees by more than 600% in the last two years. Banks and building societies can manipulate where they appear in best-buy tables by appearing to have low interest rates. In reality, they are simply switching their charge to the arrangement fee.
Intelligent Finance, a subsidiary of the biggest mortgage lender, the Halifax, charges as much as £2,999 as an arrangement fee. This is up by 601% on the maximum it charged two years ago.
The cost of arranging a mortgage cannot have risen by £2,500 in that time and may well have fallen because of computerisation - so it seems that a large portion of the fee goes into the bank's coffers.
Yesterday finance experts warned that the practice was conning the consumer, in a month which saw the fifth interest rate rise in less than a year. The Bank of England base rate stands at 5.75%, its highest since March 2001.
Lisa Taylor, of personal finance website moneyfacts.co.uk, said lenders are using smoke and mirrors to win customers. She said: 'Lenders know that people tend to judge mortgages based on the headline interest rate.
'Consequently, they can use this to offer what appears a good home loan only then to introduce the arrangement fee as a sting in the tail.
'The fees have soared in the last few years, but there has been no increase in the amount of work involved to arrange a mortgage. There is no way the fees can be justified in terms of the work involved.'
The maximum fee charged by the Scottish Widows bank, part of Lloyds TSB, has gone up some 678% in two years from £295 to £1,999. There have also been big increases at the likes of Abbey, Nationwide, Northern Rock and the Woolwich, which is part of Barclays.
Some lenders impose higher fees on home loans that are only available via brokers. Abbey mortgages sold direct to the public have a maximum fee of £995, but it can charge as much as £1,499 through a broker.
Others have begun charging an arrangement fee based on a percentage of the size of the loan, with someone borrowing £500,000 paying five times as much as a homebuyer borrowing £100,000.

CHARGES TO WATCH OUT FOR
Rate Max fee 2 years ago Max fee 1 year ago Max fee now Increase in 2 years Scottish Widows Bank 5.89% fixed £295 £395 £1,999 678% Intelligent Finance 5.39% var £499 £699 £2,999 601% Skipton BS 5.79% fixed £399 £499 £1,999 501% Woolwich 5.59% var £445 £595 £1,995 448% Dunfermline BS 5.75% var £499 £699 £1,999 401% Northern Rock 5.59% fixed £695 £695 £1,995 287% Nationwide 5.83% fixed £484 £598 £999 106% Abbey 6.39% fixed £499 £699 £995 99.4% stripe('MortFees2007'); Miss Taylor called that practice 'particularly objectionable' as the work involved is essentially the same.
Several other factors have increased the financial pressure on homebuyers. Around 75% opt for a fixed-rate mortgage, usually lasting two or three years. Up to 2.8m who took out such loans in 2005 and 2006 will see a sudden jump in payments when their fixed-rate period ends.
Being transferred to a variable rate mortgage, as many will be, would add almost £245 to the monthly bill on a loan of £125,000 switched from a fixedrate 4.75% to 8%.
The alternative of a new fixed-rate deal might carry a massive arrangement fee. And a new fixed rate would be at a much higher level than the previous one.
Mortgage brokers warned homeowners not to be blinded by low headline rates but to include fees when calculating the true cost of their loan. Experts have warned that overstretched first-time buyers now face the most unaffordable property prices since before the last market crash 16 years ago, coupled with punishing stamp duty bills and the prospect of more rate rises before the end of the year.


The average price paid by a first-time buyer, typically aged 29, stands at nearly £155,000. A record 60% of them paid stamp duty in May.
First-time buyers now have to save for four years and 11 months to cover the £9,844 needed for a 5% deposit, legal fees and stamp duty. That is 11 months longer than was needed to save the equivalent sum in 2005, according to the Stroud and Swindon building society.
Mortgage approvals have risen after a recent slump, confirming fears that interest rates will rise even further. The Bank of England said 114,000 loans were agreed for home purchase during May, up from 109,000 in April.
However, house price growth slowed during May, Government figures revealed yesterday.
The average cost of a home in the UK rose by 10.9% to £211,056 during the year to the end of May, according to the Department of Communities and Local Government. The rate of increase is down from 11.3% for the 12 months to the end of April.
Howard Archer, of analysts Global Insight, said the data added to the overall evidence that house prices are 'coming off the boil'.