A number of lenders charge a percentage of a loan rather than a flat fee, a move that one broker claimed, was stifling the housing market. He said: “Traditionally self-cert cases, and on buy-to-let mortgages, lenders charged an arrangement fee, based on a percentage of the loan. However it seems to be creeping in that this practice is being transferred to mainstream, residential mortgage cases. Where borrowers wanted a large loan the arrangement fee was okay because the fee was set, so the borrower was saving some money, but now the higher the loan, the higher the fee being charged, which seems a bit unfair. ”
Paul Fincham, senior media relations officer at Halifax, which recently adopted a percentage fee policy, said the move to a percentage approach had been made to make the lending process more proportionate. He explained: “We recently changed our policy, but the arrangement fee represents a very small amount. For the ‘typical borrower’ the switch to a percentage arrangement fee works out very favourably and there is always the option of having a no-fee deal. Arrangement fees in the market vary from £300, up to £1,000 and for the typical borrower borrowing £100,000, they would be charged the percentage fee of around £350.”
Fincham added: “A percentage deal for arrangement fees allows us to be proportionate and gives the chance to reflect the mortgage loan asked of the lender, as well as increasing choice for the end consumer, with the no fee option, which helps the borrower.”
