Six-figure mortgage arrangement fee
Updated on 09 July 2008
A mortgage with a record six-figure arrangement fee has been launched, charging people up to £137,500 just to arrange the loan.
Broker John Charcol is offering a two-year tracker deal of 0.01% below the Bank of England base rate, giving a current rate of 4.99%.
But borrowers who want to take out the loan, which is available on mortgages of between £500,000 and £5 million, will have to pay an arrangement fee of 2.75% of the amount being borrowed, giving a maximum fee of £137,500.
It is thought to be the highest arrangement fee ever charged, and the first time a set-up fee has run into six figures.
For those who cannot stomach paying out such a large sum just to arrange a mortgage, the group is also offering a rate of 5.74% with a lower arrangement charge of 1.25%.
Despite the huge arrangement fee, which compares with set-up charges of between 0.25% and 0.5% typically charged by mainstream lenders for loans of this size, Charcol insisted the deal still offered borrowers good value.
Ray Boulger, senior technical manager at John Charcol, said: "Many borrowers will be coming off five-year fixed rates of less than 4% in the next few months, and many others will be coming to the end of two or three-year fixed or tracker mortgages with rates well under 5%.
"Switching to a new large loan fixed rate without paying a big fee will mean paying a rate close to 7%. Even switching to a new tracker without paying a big fee will mean paying well over 6%.
"These two deals are designed to accommodate borrowers who can not easily afford to pay, or can but don't want to pay, the much higher rates which would be necessary without a big fee being used to subsidise the rate."
He said the loans were particularly good value for people borrowing more than £1 million.
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