| High fee deals may offer better long-term interests |
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The Halifax will now be charging high fees for it's new mortgage borrowers and has attributed the rise to its Home Mover loans’ early redemption charges and the increasing red tape cost in the two-year remortgage tracker loans.
However, do not fret. Brokers advise borrowers not to always deem high fee mortgages as bad deals as there are deals with high arrangement fees that offer one of the lowest interest rates. So, according to the size of the mortgage, paying an initial high arrangement fee to get a lower interest rate for the long term definitely does sound like a good idea.
In case of a large mortgage, a long-term low interest rate gains precedence over high initial expenses since loan arrangement fees are relatively smaller than the size of the loan, according to Ian Giles at Purely Mortgages. He says 'as a general rule, the more competitive the mortgage rate the higher the up-front fee’.
Halifax’s recent early redemption fee rise implies that new Home Mover or Remortgage tracker loan borrowers will be shelling out about 3 % of the outstanding loan in the event of a lender switch in the very first year. Current borrowers on the other hand will be charged 2%. In spite of the early redemption penalty rise to 2% for the second year of the tracker deal, existing customers will be paying only 1%.
The fee rise by Halifax came into effect in February and the account closure fee will also be increased from £115 to £150.
Independent-broker Savills Private Finance informed that arrangement fees had been increased by nine lenders last year by £130 on an average, making the set-up fees to vary between £400 and £500 and extend to even £700 in some cases. Even David Hollingworth of London & Country Mortgages in Bath, Somerset agreed and said “a bit of number crunching can make it easier to see which combination of fees and rates suits your needs.”
Lucy Russell, an events organizer from Dulwich, is quite satisfied with her remortgage even after paying a lofty arrangement fee of £600 for a two-year loan to Northern Rock at a fixed rate of 4.99%. Her large mortgage amount of £260,000 made the high fee worthwhile as she is saving about £300 per month on her repayments against the former deal.
Posted
on : Wed, 06 Apr 2005 00:00 GMT | Mortgages News
By : Rob Davis
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