Simon Webster, managing director of Facts & Figures Financial Planners Ltd, claimed that the cost of mortgage arrangement fees had escalated to an unacceptable level over the past three years. He said that the average arrangement fee three years ago was between £200-£300, with a maximum of £500 for larger loans.
However, he said the average arrangement fee had now risen to around £1,000, with fees at £2,000 or 1 per cent of the loan amount not uncommon, which was way above the rate of inflation.
Webster claimed that the cost of arrangement fees did not reflect the cost of setting up a mortgage, and that it was simply the price of Financial Services Authority (FSA) regulation that was being covered.
Webster’s concerns followed recent research by mform.co.uk, which revealed that nearly one in five lenders offered mortgages which charged fees based on the size of the loan.
Francis Ghiloni, mform.co.uk’s marketing and business development director, said: “Fees based on the size of the mortgage advance are becoming more common and can cause confusion for borrowers. If customers focus purely on the headline rate and fail to take fees into account, then they could be in for a nasty surprise.”
Robin Gordon-Walker, spokesperson for the FSA, said: “Arrangement fees must be disclosed as the customer needs to know what they are being charged and we expect firms to keep to that. We have no intention of investigating arrangement fees like we did with exit fees – we’re not a price regulator and can’t set a price. The key concern is that people are told what it is going to be.”
