Julian Knight: These hiked up mortgage fees – what a fix
Sunday 25 October 2009
Buried in the Bank of England's most recent report into lending trends – yes, I do need to get out much more – is both good and bad news. Let's have the supposed good news first; the Bank reckons the mortgage market is about to get more competitive and interest rates will fall. However, the Bank states that its discussions with lenders have highlighted "increased mortgage fees in the coming months, suggesting that, in aggregate, any reduction in spreads could be associated with higher fees".
In English, this means that lenders may reduce their headline interest rates but it's likely they will hit you with higher fees when you take out the mortgage in the first place. Therefore the bumper margin which has been enjoyed by lenders since the onset of the credit crunch will continue unabated – it's just that some consumers, who aren't looking behind the numbers, will think they are getting a better deal.
The continued move to higher fees has a harmful side-effect – apart from the obvious pain in the wallet – and that is that it stops people shopping around, and the lenders know it. They no longer feel they can benefit from consumers "churning" between providers. Instead, they want them to stay for the long haul and slapping on exorbitant arrangement fees is a good way of doing this.
As we previewed last Sunday, the Financial Services Authority focused its mortgage review on stopping dodgy lending practices – fair enough, but in what could prove to be its dying months as a regulator (if the Tories get in) perhaps it ought to think about trying to ensure a fairer deal for consumers over fees.
How is it that five years ago an average arrangement fee was around £300, and now it's closer to a grand? What has changed? And why is it that one mortgage takes £500 to arrange while another is £1,500? From what I know, there is no difference in actual paperwork. The simple truth is that most arrangement fees are unjustifiably high, and the whole practice is tinged with the feeling of a market fix.
Back to the Seventies stone age
The TUC wants private investors to pay more tax when buying and selling shares. They theorise that charging higher stamp duty will lead to people holding their shares for longer, ensuring that UK industry isn't buffeted by the whims of speculators.
I'm afraid the TUC's idea is straight from the stone age (otherwise referred to as the 1970s). UK investors already face among the highest stamp duty costs of the world's big stockmarkets, and how will paying an extra half a per cent in stamp duty deter speculation? It won't, all it will do is hit the pocket of the small investor, damage pension funds (which the TUC should be looking to protect) and ultimately make the UK stockmarket uncompetitive.
Not so tasty tax break
A few years back, with substantial tax breaks on offer – up to 40 per cent of the sum invested – there was a massive rush into Venture Capital Trusts (VCTs). In 2005-06 around three quarters of a billion was raised by new VCTs from private investors. A substantial alternative asset class seemed to have really taken off. But now new research from investment analysts Hotbed shows just how badly the VCT sector is faring – just £150m raised in the past year – with many new issues not attracting sufficient funds to get off the ground.
As for those who ploughed their money into VCTs, many probably wish they hadn't as they are finding that it's not easy to ship out of an investment which is based on investing in small unquoted companies. Meanwhile, the investment performance of VCTs lags badly behind that great big bogeyman of the politicians and unions, private equity.
The sad truth is that many went for VCTs because of the tax break on offer, a cardinal sin of investing. Yet again it seems it's proved to be another case of last year's investment must-have morphing into this year's dog's dinner.
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
Questions of Cash: What are my rights if my leak is caused by neighbours’ roofs?
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
Mark Dampier: Maybe boom, maybe bust, but we'll probably just muddle along
The 10 Best money-saving sites
How to start your own internet business
- 1 The political parties aren't all the same – which means 2015 will be a 'big-choice' election
- 2 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 3 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 4 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Immigrants make UK racist, says Ukip councillor Trevor Shonk
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
Day In a Page
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens