Oak Tree Mortgages Blog

HSBC / HSB Fee?

One of the features of the credit crunch is how difficult it has been for people to find a decent mortgage without paying huge arrangement fees.

HSBC seemed to come to the rescue of the battered mortgage borrower at the start of the year with their promise to "Rate Match" an existing fixed rate mortgage.

"Too good to be true" we thought, and it was!

The mortgage was only available to those whose fixed rate was due to end within a very short timescale. The HSBC mortgage required a 20% deposit and was only available up to £250,000 borrowing. At the launch of this product, it was pretty difficult to work out how much the arrangement fee was actually going to be. It was based upon the amount borrowed and the interest rate being 'matched'. Since the interest rate and the fee charged have a very important relationship to overall cost, it was difficult to see the value this approach delivered to a customer.

The bank received massive media coverage for the product which resulted in somewhat of a stampede. We know of one client who waited 3 weeks to see the HSBC to be told he was not eligible, during which time the mortgage market had moved against him and rates and increased.

The money education site www.fool.co.ukrecently published some interesting figures on this mortgage with rgeards to the fees charged. Currently, if HSBC were to lend you £250,000 at 4.79%, the fee payable would be £7,699. Nearly EIGHT THOUSAND POUNDS, can that be considered good value? At a time of decreasing and static property prices, is it really right for a home owner to 'give away' their precious equity to a bank through these rip off fees?

Many will not realise that this mortgage is simply uncompetitive. When shopping around for a new mortgage, it is vital the consumer takes into account the arrangement fee charged by the lender. Also, given current market conditions, is a fixed rate really the best option?

We strongly urge all customers not to take a mortgage lenders offering at face value. It is vital that the customer takes a moment to consider their options with a "whole of market" mortgage consultant. Failing to obtain professional advice in the current market could leave the borrower open to the risk of losing equity in their homes through these rip off fees.

UPDATE 21st January 2009

With house prices having fallen by an average of 16% last year, how many customers who paid such high fees to arrange a mortgage will be looking back with regret? Finding the right mortgage is very different to finding the cheapest rate!

Interest Rates and the excitable media

The editor of BBC News Business, Robert Peston, recently published a Blog article called 'Rate Shock!'

In his blog, Robert points out that the rate that Banks lend to each other (the LIBOR rate) had increased by 0.3% on Monday. This may eventually feed through into higher mortgage rates for us all.

No wonder people are confused! Most people have expected rates to fall this year, now the BBC seem to be suggesting rates could go higher. Well at least the BBC aren't responsible for interest rates, it's the Bank of England.

I took a call from a lady this morning. Her fixed rate mortgage with the Alliance & Leicester is about to expire soon. She too has listened to the conflicting opinions of friends and the media and is now very confused as to what type of mortgage she should arrange.

I explained to the customer that we should meet up to consider her options. We can explore why the Bank of England changes interest rates and also, more importantly, what a change in interest rates will actually mean to her mortgage payments. We also need to consider what changes are coming up in her life over the coming years and what her priorities are. This should help to put things into perspective and bring some clarity to the situation.

I reassured her that we would be able to work out together what is important to her and her family so we could make an informed decision.

In a time of confusion, it has never been more important for consumers to seek impartial professional mortgage advice.

A mortgage consultant can help cut through the media hype and work out with you what is really important to you and your family. A decision made clouded by the fog of media hype and speculation could cost you an awful lot of money!

UPDATE 31st January 2009, yes 2009!

Looking back at the words above, we wonder how many of those who fixed their rates in the summer of 2008 now regret their actions? Every single person we advised last year were told of the economic back drop and how the likely slowing down of the economy would lead to lower rates. Even we were suprised by how rates went. We don't claim to have a crystal ball, but we do give sensible advice about the impact the wider economy is likely to have on you and your mortgage!