Research by Moneyfacts found 11 lenders had either added, increased or switched to percentage-based arrangement fees during November, with some lenders increasing fees on products by £200.
Danny Lovey, sole trader at the Mortgage Practitioner, said this was an attempt by lenders to maintain profits once the regulator delivers its expected rebuff to rising exit fees early in 2007.
Lovey said: “The FSA has been saying since October it is going to come out with a report on exit fees and there is no way lenders can justify exit fees of £290 when Defaqto says it costs £35 to close an account. Therefore, lenders are factoring in the end of exit fees and to keep making money they have been putting up arrangement fees.”
Scott Hanton, mortgage analyst at moneyfacts.co.uk, attributed the rise of arrangement fees to lenders’ focus on maintaining their products in best buy tables, and often having to have a rate below the cost of the funds.However, he questioned the motives of those making big changes so soon after an interest rate rise.
Hanton said: "Why are we continuing to see substantial rises to mortgage fees, as surely with automated systems the timing and cost of processing a mortgage should be greatly reduced? With all the commotion in the mortgage market following the Base Rate rise, lenders may be taking this time of uncertainty to pass on fee rises, in an attempt to make them go unnoticed as consumers focus on their interest rates."
David Stewart, media relations manager at Abbey, commented: "Associated mortgage costs are influenced by a number of external factors. A higher rate would add thousands of pounds to the overall cost whereas an increase to the upfront fee is much smaller.”
