Broker criticism of ‘massive acceptance fees’

Ramesh Sharma

February 25, 2006

Peter O’Donovan, mortgage manager at Bestinvest, welcomed Portman’s two-year fixed rate product but could not understand the large arrangement fee attached to the rate. He said: “Portman has just launched a two-year fix at 3.99 per cent, but it has a massive acceptance fee of 1.25 per cent. I think this high percentage of the loan is very difficult to justify.”

Paul Howard, director of intermediary sales at Portman, responded: “It’s a question of doing the maths and offering clients a really good choice of products. The 3.99 per cent is a very good rate and allows borrowers to minimise monthly repayments while adding the arrangement fee to the loan, but if the borrower is looking for a different option, our 4.3 per cent is also highly competitive and has a standard fee.”

Karen Wint, head of marketing and PR at Leeds Building Society, said: “We are constantly looking to offer greater choice to clients and look to offer a fees-free version of our mortgage products. The majority of mortgages in our range, where a fee is applicable, have a set fee. We have introduced a range of 10-year fixed rate products that also have a fee-free option, or have a fee as a percentage of the loan.”

Ron Stout, PR manager at Northern Rock, said: “We have offered a mortgage with a 1.5 per cent product fee since mid-November 2005. The rates for the product have remained at 3.99 per cent and 4.19 per cent since then. Such products extend customer choice, with borrowers able to secure a lower rate in exchange for a higher fee. To consider fees in isolation can be very misleading.”

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