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Sunday, 4 September 2011

Are 'Soaring' Mortgage Arrangement Fees Excessive?

Moneyfacts July 2007 warning
In a re-run of 2007, this time amidst persistent low interest rates, MoneySavingExpert has reported huge increases in mortgage arrangement fees. In 2007, the suggestion was that the high fees masked artificial reductions in headline interest rates. This year, the suggestion is that higher arrangement fees are being used to make up for low interest income:
"Typical mortgage rates are at a record low, and while this undoubtedly means reduced costs for consumers, lenders are partly offsetting that fall with a rise in costs to secure that deal."
Of course, that may be hard for lenders to justify in relation to regulated mortgages, on the basis of treating customers fairly, disclosure obligations or under the excessive fee provisions in the FSA's Mortgage Conduct of Business sourcebook (MCOB).

In particular:
"When determining whether a charge is excessive, a firm should consider:

(1) the amount of its charges for the services or products in question compared with charges for similar products or services on the market;

(2) the degree to which the charges are an abuse of the trust that the customer has placed in the firm; and

(3) the nature and extent of the disclosure of the charges to the customer."
But I'm sure each of the lenders has prepared some kind of explanation in case the FSA or the competition authorities inquire...