Mortgage arrangement fees have risen sharply to their highest ever levels, with eleven lenders imposing increases of up to £200 in November 2006. Arrangements fees have to be paid upfront when the loan is taken out and some homebuyers will now be paying £1,000 or more.

One reason for the increase is that mortgage administration costs are higher. This is due to regulations laid down by the Financial Services Authority in October 2004. Some lenders are also charging higher fees so that they can keep the interest rate down. This means that customers can opt for higher fees in order obtain a lower rate, and therefore lower repayments.

The increasingly complicated mortgage market means that brokers are busier than ever. As well as the fees, interest rate and total cost, there are other considerations for homebuyers. For example how much flexibility is there in the deal and is there a higher charge for a 95% mortgage? In general more choice is good for customers, but trying to find the right product can be daunting. Statistics have shown that more people are taking advice to help them sort through the options and make sure they get the best, most appropriate deal.

The latest development in this area is that the FSA have stepped in again, making mortgage lenders justify any increases in their arrangement fees, after it was discovered that many mortgage providers had hiked up the fees on lots of existing mortgages. Consumer groups are encouraging people to register a compliant if they have suffered this and they expect the mortgage providers to provide compensation.

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