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Lenders convert to “percentage” arrangement fees

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by Gill Montia
”Lenders

New research from MoneyExpert.com indicates that mortgage lenders are keener than ever to apply fees based on a percentage of the loan they are providing.

Application fees have become something of a scandal in the credit crisis, with banks and building societies applying levels that make headline rates nonsensical.

The charges have offered a convenient method of increasing margins for lenders, many of whom will add the fees to the total mortgage debt, sometimes increasing the cost of a loan by thousands of pounds.

In particular, MoneyExpert is warning those remortgaging to take account of such charges and be aware that over the past twelve months there has been a 14% rise in the number of products demanding a percentage rate.

According to the price comparison website, mortgages with percentage fees now account for 49% of the market, with lenders charging between 0.4% and 2.5% of the value of the loan.

In addition, only 4% of products in this category place a cap on the fee, leaving people borrowing large sums of money exposed to extremely heft charges.

The study also reveals a decrease in the number of fixed-rate deals charging a set fee, from 57% to 51%.

However, the highest charge on the market has soared, from £1,999 in 2008 to £2,499 today.

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News posted: September 7, 2009

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