Watch Out For This Fee!

2004 saw lender change the way the Lenders wanting to show well in the best buyer tables reduced headline rate but increased arrangement fees to make up the difference

The average fee leapt 40% from £339 to £480 in just a few months, according to brokers John Charcol, and has continued to march upwards ever since.

HSBC imposed a shocking £7,699 arrangement fee for the lowest rate on the maximum £250,000 loan in its "mortgage matcher" range. That's almost £3,850 for each year of the two-year fix or £321 a month.

Buyers with small deposits are most vulnerable. Abbey offers just one deal for those borrowing 95% of property value, a five-year fix at 7.09%, you will have to pay £2,499 booking fee

The Abbey won't let this fee be added to their mortgage, but demands the cash be paid upfront. The same goes for HSBC mortgage deals.

Other lenders charge arrangement fees as a percentage of the money borrowed, a practice that can be even pricier for larger loans.

Alliance & Leicester offers two two-year fixes with a 2% "product fee". If you borrow £200,000, that would cost a whopping £4,000 even if you can offer A&L the bargaining chip of a 25% deposit. Imagine paying £4,000 every two years just for the privilege of getting a mortgage!