Mortgage lenders cash in on fees

Mortgage lenders stand accused of profiting on the current financial insecurity of the public by way of raising loan fees to record levels.

Some of the biggest names in the UK have been named as the worst culprits, with HSBC, the Royal Bank of Scotland and Abbey among them.
The three have pushed up the cost of arranging mortgages by 183%, 110% and 92% respectively on some deals, with observers citing ‘underhand tactics’ since the current credit crunch began to take hold last year.
    

£50 extra per arrangement

Reports show that financial institutions have taken £3 million in the last month alone in arranging fixed rate deals, with fees raised by an average of £50 per arrangement on previous rates. The same organisations have trumpeted of reduced interest rates in order to draw attention away from the increase in arrangement fees.
Extra costs are also being levied on the cost of unsecured personal loans, and by keeping back any reductions made in financial dealings.
    

Abbey rate over £1000

An average fixed rate fee of just over £1076 – Abbey’s current – represents an increase of almost half on last year’s £561, while RBS levies an average of around £868 as compared to £413 last year. HSBC, meanwhile, now charges almost £314 whereas one year ago the figure would have been £111.

These rises take away the benefit of any rate cuts offered by the lenders; Abbey has cut the rate on a three year ‘tracker’ loan to 5.79 percent, previously 5.89 percent, while the arrangement fee went up 30 percent to £1950 from just under £1500.

If one takes a £200,000 loan as a guide, the reduction in interest rate, countered with the additional fees, results in a £9 saving over the previous deal.
    

Nationwide offers respite

Of the major UK lenders only the fees from Nationwide have fallen, down 43% to just under £300 from £527.

Mortgage rates have been falling of late with the cost of borrowing wholesale enabling savings, not passed on to the customer.

The eagerness of lenders to capitalise on the current state of the market, and the public uncertainty, has been noted by analysts in the market.

Unsecured loans have seen a dramatic rise in cost, too, with current rates up by 2.6 percent compared to the last time the bank interest rate stood at the current level of 5 percent.