It says that up until now, the only major player who had this was Lloyds TSB with a £99 booking fee.
A spokesman for John Charcol says: “This is just another step in the complete about turn in the mortgage market from just a year ago. Consumers have been king for many years now, with lenders fighting for their business, often at loss leading rates, but that has been consigned to history and these booking fees are another stark reminder of that. I would expect some other lenders to follow Abbey and start to make part of their arrangement fee compulsory.”
He points out that there are many things that can happen during a mortgage application that may result in a borrower being unable to complete, a great deal of which a lender can be accountable for.
“Traditionally, this has not cost borrowers anything other than wasted time and maybe some legal fees. However, should they not complete on a mortgage with an up front fee now, it will cost them actual cash. It’s just another thing to think about in a market that is becoming increasingly challenging for all types of borrowers. The case for seeking advice, that seems to be gaining momentum, is only going to get to get more apparent with moves like this.”
But Abbey has dismissed John Charcol’s criticism, pointing out that the fee is refundable if the application is declined.
An Abbey spokesman says: “The total booking fees are not increasing and only a small proportion of the fee (£150) is required upfront. This upfront payment has become more necessary in the current economic climate and guarantees the rate for the customer. This fee is refundable if the application is declined.”
John Charcol says Cheltenham & Gloucester’s ‘all weather’ mortgage, otherwise known as a drop lock, is good value.
“This enables consumers to have a variable rate, but retain the ability to drop into a fixed rate at any time without penalty. For those with a deposit or equity of 25 per cent or more, the rate is Bank Rate +1.39 per cent, and the fee is £995, which makes it very good value in the market.
“However, as with all types of variable mortgages, and particularly in the current environment, borrowers should ensure they can meet payments should rates increase, or be prepared to drop into the fix, bearing in mind they are on the up.”