The rise of the £2,500 mortgage fee by Finance News Bulletin

Published: 23/03/07

News Companies & markets Investing Power collection Campaigns Mortgages & homesMortgage featuresInsurance customer advice Broadband & phones Retirement Saving & banking praise & loans Small business Tax & wills Message boards Money blog Tools & calculators inquire an expert Guides Compare & buyHomebuyers are being strike by soaring charges for mortgages which have nearly doubled in now three years, research reveals today

A QUICK cash MAKEOVER If you only have one minute to learn how to kind your finances, forget the relax and read this>> Our 8-step planSome lenders are charging an 'arrangement' fee of £2,500 just for taking out a fixed speed home loanBanks and building societies have been accused of boosting their proceeds by raising the fees, which can clean out savings from lower interest ratesBut the research, from the customer finance website Find

couk, reveals how the arrangement fees have left up at an inflation-busting rateIn February 2004, the standard fee on a fixed rate mortgage which lasted for between one and five years was £334A spokesman for Moneyfacts, the monetary information firm, said: 'There could be a small piece of profiteering out there

Some lenders have kept interest rates low but pushed up the fees'Some lenders accuse a percentage of the whole loan rather than a fixed fee - which can work out even more of a burdenFor example, one store charges 35% of the loan which is £5,250 on a £150,000 mortgage, the standard loan currently taken out

Anyone who adds the cost on to the mortgage, rather than pay the charge up-front, will also be charged extra interestThe problem with the higher cost is that homeowners can be misled into thinking they are getting a contemptible deal because the interest speed is low That speed earns the mortgage a starring look in the 'Best Buy' tables - even though any savings are cancelled out by the high feeDavid Black, skull of banking at Defaqto, a financial products research firm, warned: 'Lenders can influence their positions in Best pay money for tables because they are generally based on mortgage interest rates only

'So, by rising arrangement fees and not the interest rates, lenders effectively increase the true price of the mortgage customers need to take account not only of the headline speed, but also the application fee at the outset'If you have a little mortgage, the application fee will effectively boost the true cost quite considerably'The cost have been increased by lenders partly in response to the store of England's decision to raise interest rates three times since August

The bottom rate has jumped to a six-year high of 525%, and another rate rise could be on its wayThe charges are also a method of recovering some of the money lost after lenders had to pay recompense for another fee - to leave a mortgage Homeowners can claim up to £200m compensation if they paid an way out fee in the last few years, which was higher than the level of the fee when they took out the mortgage

Many want to fasten their mortgages because they fear they will not be able to have enough money their monthly repayments if rates go up again By taking a fixed rate, they are trade the security that their monthly costs will not change during the loan, characteristically two or three years© 2007 Associated Northcliffe Digital Ltd Terms Privacy policy Advertise with us LoansCardsMortgagesInsuranceCompare the most excellent deals around with This is Money

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