Abbey deters high LTV customers with arrangement fees

| June 12, 2008 | 0 Comments
Abbey deters high LTV customers with arrangement fees

Abbey has become the first leading UK mortgage lender to demand advanced payment of arrangement fees on some of its loans.

Customers needing to borrow 95% of a property’s value will have to trump up £2,499 rather than add the charge to their loan.

Lenders have already applied penalties to the 95% mortgage market by saving their most attractive rates for borrowers who have larger amounts of equity in their homes. Many now require a minimum 10% deposit.

This has left borrowers requiring high loan-to-value (LTV) ratios (typically first-time buyers) facing higher mortgage costs than their better endowed peers.

Banks and building societies are nervous that high LTV deals could soon leave borrowers in negative equity, as house prices fall.

Abbey says that its average LTV stands at 48% and the new requirement on arrangement fees will only affect around 3% of customers.

The bank currently only has one 95% LTV deal on offer; a five-year fixed-rate loan at 7.04%, the arrangement fee is £2,499.

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