UK Lenders Prefer Percentage Arrangement Fees to Fixed

One of the latest researches conducted by an online financial company showed that more and more British banks and building societies tend to impose percentage fees on residential mortgages, which fact poses significant problems for borrowers in need of large loans (it should also be remembered that they already struggle to get approved for a high LTV due to scarce mortgage availability). The research found out that the number of mortgages with percentage arrangement fee grew by 6%, from 43% to 49%, in the course of the past year. At the moment, an average percentage fee charge by British lenders amounts to 0.89% - this constitutes as much as £1,335 on a £150,000 residential mortgage loan. However, several lenders that are not to be named, charge a percentage fee of up to 2.5%, thus adding a large amount of money to a mortgage. Borrowers who need large loans find themselves most affected as they are the ones who need to pay enormous sums in arrangement fees. It has to be mentioned that only a mere 4% of all UK lenders do impose a cap on percentage arrangement fees. Clearly, borrowers who require large loans are better off with fixed arrangement fees, but the latter have also increased dramatically over the past year. In 2008, the largest fixed fee amounted to £1,999; now, the highest one is charged by the Bank of Scotland and constitutes £2,499. Even those offers that seem to be most profitable at first glance might turn out to be not the best ones. For instance, the latest mortgage deal launched by HSBC comes at a mere 1.99% and a fixed arrangement fee of £1,199. Looks attractive? Alliance & Leicester mortgage deal offered at 2.95% comes with no arrangement fee and allows borrowers to save £50 over 10 years, when compared to the above-mentioned HSBC offer. British mortgage brokers suggest that all borrowers carefully evaluate all offers available from lenders in order to go with the best option. “Best option” should be best in all terms, meaning it has the best interest rate, the best arrangement fee and the best valuation cost.