Posts with tag: mortgage fees

Buy-to-Let Lenders Favouring Percentage-Based Fees

Published On: April 20, 2017 at 8:11 am


Categories: Finance News

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Buy-to-Let Lenders Favouring Percentage-Based Fees

Buy-to-Let Lenders Favouring Percentage-Based Fees

Percentage-based fees for arranging loans have become the new standard among buy-to-let mortgage lenders, according to the latest Buy-to-Let Mortgage Costs Index from Mortgages for Business.

Flat fees have long been popular as a way for lenders to maintain profitability, while still offering competitive rates. Meanwhile, other products instead carry a variable fee based on the loan amount.

Figures from the first quarter (Q1) of 2017 show that 44% of all buy-to-let mortgage products now carry percentage-based fees, overtaking flat fees (41%) for the first time in four years.

There was also a rise in the average flat fee, up to £1,446 from £1,397 in Q4 2016. Together, these changes have increased the average effect of mortgage charges to 0.64%. This compares to 0.62% in Q4, and is the strongest effect recorded since the first half (H1) of 2015.

Steve Olejnik, the COO of Mortgages for Business, comments: “With the challenges lenders have faced to generate business in the face of successive blows to the buy-to-let sector, it is only natural that many have chosen to focus on cutting rates at the cost of increased fees. The recent trend towards percentage-based fees is an example of lenders doing exactly this, as fees of this type become more expensive for larger loans.”

The index also shows that there has been a shift in the pricing of five-years fixed rate products. Although products available at 75% loan-to-value (LTV) and below remained on trend, five-year fixed at higher LTVs saw a 0.2% rise in headline rates.

This was fuelled by an influx of investor demand following tighter Prudential Regulation Authority (PRA) affordability guidelines, which only partially apply to long-term fixed rates.

Landlords, have you seen a move towards percentage-based fees from buy-to-let lenders in recent months? Will this affect your decision to take out a loan?

Beware! Low Mortgage Rates Have Frightening Fees

Published On: October 29, 2015 at 2:51 pm


Categories: Finance News

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As if we need more fear-inducing facts at this time of year! has revealed that the true cost of low rate mortgages is frightening.

Beware! Low Mortgage Rates Have Frightening Fees

Beware! Low Mortgage Rates Have Frightening Fees

New research from the website found that too many borrowers opt into low rate products mistakenly believing that they will save them money.

However, the study shows that many would be better off choosing a deal with no arrangement fee over a lower rate deal.

Finance Expert at Moneyfacts, Charlotte Nelson, explains why: “Whilst these low deals look great on paper, they are often compensated by high fees that can scare even the most seasoned borrower.

“With fees on mortgages ranging from nothing all the way up to £2,794, with the average mortgage fee sitting at £939, it is easy to see why it can be a costly mistake to opt for the wrong deal.”

She states that low rate high fee products favour borrowers buying properties at the high end of the market.

She continues: “However, large fees can turn what appears to be a cheap deal into a costly one for the majority.

“For example, by opting for the lowest two-year fixed rate mortgage at 60% LTV with no fee will mean borrowers will be around £1,500 better off a year compared to the lowest option in that sector.

“Arrangement fees allow providers to have greater flexibility in what rate they offer, however, the set up costs are not greatly different between mortgages, so many will question what this is actually for.”

Nelson reports that the size of the arrangement fee is particularly important on two-year fixed rate deals, due to the short-term nature of the product: “Borrowers will have to remortgage relatively soon and could again pay yet another fee.”

She urges borrowers to calculate the true cost of their loan: “There are deals out there with no arrangement fee, so borrowers will have to decide whether they choose a trick or treat when picking a mortgage.”1

Don’t be caught out by high fees, make sure you work out how much the loan will actually cost you.