Borrowers getting fleeced on fees
June 18, 2008
It seems that the average borrower looking for a mortgage simply cannot win these days. Even though house prices are coming down, which should have been good news for first time buyers looking to get their foot on the property ladder, and interest rates have been cut three times since December, which should be good news for all borrowers, things are still incredibly tough for mortgage borrowers, and many are still finding that it is impossible to get a mortgage due to a variety of factors that are affecting affordability levels.
Many lenders have continued to increase their mortgage interest rates for new borrowers despite the three recent base rate cuts, and this has left groups such as first time buyers high and dry, as they are finding the cost of taking out a mortgage is too high. The matter has not been helped by the dramatic reduction in mortgage products that has now hit the UK, with a drop of two thirds in the number of mortgage products available now compared to last year, before the onset of the global credit crunch.
Another blow to mortgage borrowers is that lenders are now demanding far higher deposits than the traditional 5%, and those that cannot stump up the higher levels either have to resign themselves to not being able to get a mortgage or have to pay over the odds on interest on their mortgage loan. And now lenders have found another way to add to the burden of the average mortgage borrower, and this is through the arrangement fees that many charge when the mortgage is taken out.
A recent report has shown that the fees that many lenders charge to set up a mortgage have rocketed over the past year and a half, and some borrowers are forced to pay thousands of pounds in order to take out a mortgage. One lender, Abbey, now charges an arrange fee of around £2500, and what’s more it now demands that this fee is paid upfront rather than being added to the mortgage loan with borrowers who cannot put 10% or more down by way of a deposit.
According to recent figures there were just 22 fixed rate mortgages that charged arrangement fees of £750 or more in September 2006. However, this has now rocketed to 323 fixed rate mortgages that have fees in excess of this amount. The average fee in September 2006 was around £517 but this figure has soared to an average of £860. Some lenders are charging up to a massive £5000 by way of arrangement fees.
One industry official recently said: ‘Such high application fees will come as something of a shock to many homebuyers. We’re just not used to these levels. The days of fee-free mortgages are over and frankly getting anything under £1,000 is something of a coup. With stamp duty reaching an average of £4,950 per property, moving home is becoming more and more expensive.’
Recent additions:
- Consumers reluctant to switch mortgage lender
- Abbey’s 125% mortgage offer not appropriate
- Many worried about effects of expiring fixed rate deals
- Interest rates could fall twice by June
- Most repossessions involve sub-prime lenders
- October 2007 saw homeowners struggle with mortgage payments Mortgage payers in the UK encountered a difficult month in October when it came to making mortgage repayments according to recent data from the Council of Mortgage Lenders. High interest rates and property prices, coupled
- House price growth could grind to halt in 2008 According to officials from the Nationwide Building Society 2008 could see house price growth grind to a halt in the UK. The building society states that there is to be a 'significant slowdown' in house
- Borrowing rates still rise despite base rate cuts There have been three base rate cuts since December of last year, with the Bank of England reducing rates by 0.25% each time, taking the base rate from 5.75% to 5%. Over the past couple
- Are discount mortgages a good choice? From fixed rate mortgages to a tracker mortgage, and from interest only mortgages to buy to let mortgages, the world of mortgage loans has become more complex than ever these days, with a wide range
- Cut out the middle man and sell your home online People buy all sorts of things online these days, from holidays and cars to entertainment and groceries. According to one recent report some people also look for a new home online, and the struggling homeowners
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