Property: Must we pay the penalty for arranging a mortgage?

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The Independent Online
Buying a home is rapidly becoming more and more of a headache for prospective purchasers. The boom in prices means suitable properties are thin on the ground, forcing buyers to pay silly prices for what little is available.

In turn, gazumping - raising the asking price of a home after it has already been agreed with a buyer - is staging a comeback.

Headaches for buyers then. But the problems they face are compounded by the attitudes of some lenders, who sometimes treat would-be borrowers quite badly.

In some cases they promise attractive rates of interest but within tight deadlines that many clients will not be able to meet.

Some mortgage brokers believe that lenders deliberately structure their mortgage offers to ensure high failure numbers. Cheap headline rates are subsidised in part by those who lose their non-refundable booking fees.

One person who has lost out is Rosanne Priest. She approached C&G, the newly-bought mortgage lending arm of Lloyds Bank, for a loan to buy a house in Cardiff.

"I chose C&G because they had a very attractive five-year fixed interest loan pegged at 7.59 per cent," Ms Priest says. "Before they would consider an offer I had to pay a non-refundable pounds 495 booking fee."

She was told in December that completion would have to take place by the end of February. On the eve of exchange of contracts last week, the vendors pulled out.

"I contacted C&G. All I wanted was to extend the deadline so that I could find another property. They told me that unless I was able to do so by the existing deadline, I would forfeit the fee."

A C&G spokeswoman said the mortgage involves a series of money-market transactions with fixed time limits which could not be altered and the product itself had been withdrawn on December 8.

She adds: "The problem is if we were to make an exception in this case we would have to do so in many others".

Stuart Bernau, a director at Nationwide Building Society, says: "We have arrangement fees. In cases like this, we would aim to maintain a relationship with a customer who wants to do business with us".

Ian Darby, director at John Charcol, one of the UK's largest mortgage brokers, says: "Few lenders would insist on imposing them in such cases. It should be said in defence of C&G that its mortgage was one of the more attractive ones.

"It did not charge a valuation fee. Also it did not have a redemption penalty or charge a mortgage indemnity guarantee, unlike most other lenders." Had Ms Priest asked for a few days more to complete the purchase of the existing property, C&G might have complied, Mr Darby suspects.

He adds that C&G may have calculated on a high proportion of loan offers, perhaps 40 per cent, not being taken up when it set its rates. This failure rate, at pounds 495 a time, is twice as high as John Charcol generally experiences for its buyers.

Mark Chilton, marketing director at FirstMortgage, a telephone-based home loan provider, agrees that Ms Priest's experience is rare: "We offer a wide variety of mortgages of our own, plus those of many other lenders and generally we find that they are prepared to be flexible.

"We would not charge them another arrangement fee for a new loan."

Two people who found buying much less stressful than expected were Barry Dance and his partner Hayley Cattermole.

Mr Dance, a car parts executive who lives near Colchester, in Essex, says: "We saw a house we liked, but the estate agent said that it had already been sold. Then, we saw a For Sale board outside it again and spoke to the agent again. He told us that the house was on the market once more, but we had to exchange within seven days and complete within 28."

The couple contacted Steve Lidford, home loan expert at The Mortgage Bureau, part of the Mortgage Intelligence network of more than 400 brokers throughout the UK.

Mr Lidford was able to arrange a mortgage from Bank of Ireland, which is about to take over Bristol & West Building Society, inside the deadline set by the vendor.

Steve Royal, managing director at Mortgage Intelligence, says the incidence of vendors pulling out at the last minute is increasing: "Buyers are worried [that] they may lose out. We have responded by mobilising several of our mortgage providers. Also we generally do not charge any application fee."

First Mortgage 0800 080088; Mortgage Intelligence 0800 246000; John Charcol 0800 718191

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