When people look at getting a mortgage they tend to look at one thing and one thing only, the interest rates. These are the headline grabbing figures that you’ll see newspapers harking on about and what many mortgage advisors keep an eye on. The thing is that whilst these rates can fluctuate up and down if the market is affected by major events like the sub-prime lending in America, it can also fluctuate for other, more sinister reasons.
At the moment interest rates are the big topic in the financial service business as any new house buyer will no doubt tell you that the interest rates on most mortgages at the moment are really high. It is around now that most lenders will try and undercut the competition as they still want to lend money to responsible borrowers but how can they do this without making a loss?
Recently some mortgage industry insiders have speculated that the lenders may be trying to recoup their money elsewhere through stealthy arrangement fees. This tactic is a little bit dirty as they recognize that many borrowers will be solely looking for the lowest rate they can find on comparison tables or TV advertisements. What they don’t realise is that in order to attain these attractive interest rates may cost more than going for a more expensive fixed rate mortgage!
These lower rate mortgages may require you to put forward a 25% deposit and many house buyers simply cannot afford this level of payment up front. The buyers who go for a low deposit such as 5% are the most at risk though as they are more likely to be lumbered with extortionate arrangement fees, these used to be around £300 and many people agreed with this as it covered all the administration costs that undoubtedly were considerable for something as important as a mortgage.
The advent of comparison sites and buyers taking more time to compare rates meant that lenders needed to be seen as having the best buy so increased the arrangement fees by 40% to get themselves at the top of the table. This ideal has spiralled out of control ever since with arrangement fees now charging astonishing amounts in the name of “arrangement fees”, HSBC charge £7699 on their lowest rate for a £250,000 mortgage and makes you wonder how much more arrangements need completing these days?
They aren’t the only ones with many other banks charging thousands in order to bring their rates down for the media and the public. So when looking for mortgages or a remortgage make sure you take note of more than just the attractive interest rates that you’ve been shown on television, there can often be larger fees and charges lurking underneath their shiny façade.
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