Landlords and brokers are up in arms about alleged profiteering by buy to let mortgage lenders’ arrangement fees.
These jumped last autumn as a result of Liz Truss’s mini-Budget, and its subsequent impact on institutional and individual borrowing. Lenders the. introduced higher product fees on BTL mortgages.
Now a survey of landlords and mortgage brokers by news agency Newspage shows high levels of discontent about the fees.
Portfolio landlord Kundan Bhaduri, director of London-based The Kushman Group, is accusing lenders of profiteering and wants government intervention.
He says: “While some argue that these fees are a strategic way to maintain lower interest rates and enhance affordability, it is becoming increasingly evident that they border on profiteering, as they are causing extreme financial distress to landlords.
“Lenders used to charge around £995 to two per cent in arrangement fees, but they're now not far off £50,000 in some cases.
“It's vital that the government steps in to regulate and curb these exploitative fees. Transparent fee structures and fair competition should be the bedrock of the BTL mortgage market, because right now it's the Wild West.”
Justin Moy, founder of EHF Mortgages, says: “Arrangement fees on BTL mortgages have become brutal since the mini-Budget, with some as high as seven per cent of the mortgage amount.
“Not only is the fee often staggeringly high, but thousands in extra interest is then charged, too, as the fee is typically added to the loan. No one likes the high fees, but that lower rate and payment each month may be crucial for landlords to make the numbers work.”
Meanwhile Amit Patel, adviser at mortgage broker Trinity Finance, says: “Daylight robbery were the words of one client when I told him that, for the affordability to fit, he would have to pay a seven per cent arrangement fee.
“A seven per cent arrangement fee on a mortgage of £350,000 equates to £24,500 and this is a serious dilemma for any landlord.”
Another broker, Elliott Culley of Switch Mortgage Finance, adds: “Mare struggling to make any profit and now they are being told to pay high fees to gain access to lower rates. More landlords will sell up, which will pile further pressure on the rental market.”
And Riz Malik, director of R3 Mortgages, comments: “For those landlords aiming for a certain loan size, choices might be limited without lower interest rates, and to achieve those lenders are now having to charge bigger fees.
“A drop in rates will often expand options for landlords and, for now, the way high arrangement fees are helping improve affordability seems like the status quo.”
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I think broker’s have their snout in the trough also.
I seen a small landlord with only one buy 2 let struggling so much. He was trying to get a longer term fixed rate but relying on the Broker who kept telling him he couldn’t get it, maybe so or not but landlord back frequently to pay even more arrangements fees, now in triple trouble with high interest rates and Renter’s Reform Bill.
That sounds like a terrible situation - all the financial costs associated with buy to let and then the knowledge that the business is going to be destroyed by the Renters Reform legislation.
Easy fix for that landlord- Sell up, take the hit and move on. Nothing was ever guaranteed
It is about time that Government brought the BTL market under scrutiny and finally regulate such products, it’s 2023 not 1023!
Portfolio LL’s are classed as the professionals in the market. Those who are more likely to meet rental standards and maintain a profitable investment/business yet the Prudential Regulations merely penalise the sector with what is now a very limited specialist market removing all the markets competition!
This is backward thinking at best! Ridiculous!
And who had double glazing back then apart from no one and I had parcel tape on the window gaps.
People are going soft, too in-active and Obese look around you it’s disgusting, people pussyfooting around afraid to speak their mind in case of offending someone.
I totally agree. You can't say anything incase you upset someone. I heard on the news a seemingly balanced 'gender expert' talking about how schools are not sure how to deal with all the pronoun nonsense. So they are calling in these 'gender experts' to schools to teach kids this crap. She says they're activists. They are very loud, organised, good at getting their message across. Sounds like Shelter (I heard Polly Bleate has good experience in communications), Gen Rant and the rest of the motley crew.... But apparently there's no real science supporting any of this gender crap and identifying as a cat etc. It's all just unproven (and ridiculous theories). A bit like the basis of the Renter's Reform Bill...
I was offered a commercial mortgage which had £10k in broker, lender and survey fees we then had to consider another £5k in ours and lenders legals.I would like to know what these fees cover as I get charged a admin fee, completion fee, bank fees and legal fees so what does the lenders fee actually cover? It’s like we are paying twice for everything
Surely this lot must be regulated under competition law acting like a monopoly as funnily they are all doing exactly the same with fees!
The Fees and interest rates on BTL mortgages are extremely high . Landlords with existing BTL mortgages are now facing 4% over Bank Base Rate . A few years ago that was the rate being charged to Heavy Adverse Applicants who had CCJ Poor credit history because it was high risk lending.
Do Banks now considering BTL lending High risk ?
If they do I would have to agree with them . Section 24 Taxes, High interest rates, Selective License, EPC, Long drawn out court procedures to evict non paying tenants. Both Political parties anti Landlord policies
It's a problem that is further compounded when extortionate fees are added to the loan as it effectively pushes the LTV up which, when a landlord comes to remortgage, could easily make the difference between getting a new loan and not. It's symptomatic of the commercial (and governmental) world today... "How can we absolutely maximise what we get in the short term...?"
The product fees for some lenders are ridiculous and will cause LTV problems next time round if the market is stagnant or falling. Adding a 7% fee to the outstanding balance is only really helpful for landlords who are planning to die in the next 5 years and have an IHT problem. For anyone else it's storing up future remortgage or product switch problems.
Brokers are a major problem. I had problems with one last year who applied for the wrong product and then failed to correct his error when I immediately pointed it out to him.
I've had problems with a different broker this year. This year's broker lack of knowledge and general errors will cost me over £40000 in extra interest. She simply didn't understand the different criteria lenders have. An ex Council house with a flat roof and 3 separate tenancy agreements in the most sought after part of the city isn't exactly vanilla. There are lenders who will do it but there's a lot that won't. She wasted weeks messing about trying to place it with lenders who clearly state they won't allow multiple tenancy agreements. All the while rates were shooting up.
I cannot believe there are people calling for more regulation. No one is forcing anyone to take these deals. its the lenders money and that's the fee, deal with it and stop complaining. Honestly as soon as the market get a bit tough all the Zombie landlords are moaning. Perhaps your business model wasn't good enough to begin with and the only reason you are still in the market was because of artificially low interest rates. Personally I am happy to see all the zombie landlords go to the wall.
Zzzzzzzzzxx
Michael Jackson, you are utterly wrong. If the government has interfered with legitimate fees of referencing the tenants and safeguarding their deposit in a governmental approved deposit scheme. This is a business expense relating to the tenants obtaining accommodation. This cost needed to be paid by tenants or at least half of it. This is not a profit for landlord. It has now become extra expense. If you compare the arrangement fees, which is repeated every 5 years is straight profit by the bank and it is astronomical, not just £100 to £200, which is the initial fees that were charged to the tenants and they were valid. It is frustrating that the same lender charges arrangement fees every time you re-mortgage with them. They know your record of timely monthly payments. LLs take a risk with the tenants and cannot even get their property returned to them on a timely basis and no rent payment, forget the interest on free rental. The banks will always charge you interest until you pay up. You have the audacity to call landlords zombies. What planet are you from? You are sick.
Michael Jackson, sell up is not answer. Just like tenants fight for removal their fees, right to stay in someone's house whether they pay rent or not, the LLs need to fight for their rights to. Enough is enough for any LLs. You must be one of the corporate LLs who is greedy for cheap properties from LLs selling up to you. Shame on you.
Vibha, no wonder you are upset no surprise if you got his name wrong.
There’s a bit of I’am alright Jack going on here.
Seems this is another classic case of a landlord that’s operating via Ltd Company and least affected.
Lenders charging high fees is not a problem if there are plenty of competing lenders. If they are all charging similar high fees then the Competition and Markets Authority should get involved.
It's no good trying to regulate the fees, same as it's no good regulating rents.
I bet it won't ever happen, it's blatant robbery! Many years ago and after they'd clamped down on other exorrbant, similar illogical fees: they then looked at every other possible way to sc£w us over, these fees soon became normal...
Absolutely disgusting, by same who have helped decimate our/world economies - how many times now, how many brought to book!
Why we can't let more fail is beyond me, lol, yet, they have more protection then endangered species, wonder why...
You all seem to have missed the point. Banks etc are now in the BTL market and are forcing out their competitors!
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