As the payment shock for many borrowers continues with high SVR’s, lower interest rates on mortgages are often not what they may seem. It has been reported that the cost of ‘arrangement fees’ charged by lenders and associated with buying a mortgage, have increased by as much as 30 per cent over the last three years, however, the mortgage broker sector are experiencing a decrease in the fees paid to them by lenders for introducing borrowers causing more pain. There seems to be only on winner!
Losses for mis-sold PPI need to be made up, but who pays?
With huge losses for banks in particular to make up following one mis-sold financial products scandal after another; feelings are running high amongst many within the financial services sector about the strategy being used to balance their books. Sceptics believe that the provisions made for PPI claims by some banks will never reach all of the victims for which the funds are intended. So who will pay for these forecast losses? It would appear that borrowers will.
What is the ‘true cost’ to borrowers?
Expectations were high when the good news sunk in relating to a sustained all time low bank base rate; forecasts are that this may continue for a while yet, however, has this been reflected in the ‘true cost’ to borrowers? The simple answer is no. Low interest rates now often attract high arrangement fees. Borrowers who are lucky to be offered a loan need to consider the true cost; if this fee is added to a loan and interest-only terms apply, the true cost of a loan can be high, sometimes it is better to take a higher interest rate with a lower arrangement fee. Making this clear and understood by borrowers is difficult; always look at the ‘true cost’ of a loan over the period in which it is borrowed. It should be found in the small print.
Are lenders squeezing the life out of the mortgage market?
With mortgage brokers experiencing lower procuration fees paid by some large lenders, also aggressive marketing attempts to attract borrowers into buying direct from lenders, reports about the demise of brokers continues, we may see the life squeezed out of the mortgage market. This could lead to the return of increased volume, niche lending at higher cost to those who do not qualify for the ‘cherry picked’ client profiles wanted by lenders who are reluctant to lend.