What is a lender's arrangement fee?

What is a lender's arrangement fee?

Ray Boulger (Mortgage Advisor) gives expert video advice on: What is a Homebuyer's Report?; What is stamp duty and how much is it?; Is there anyway that I can avoid paying stamp duty? and more...

An arrangement fee is a fee which a lender charges when you take the mortgage out, and it is partly to cover the administration costs the lender incurs when you take the mortgage out. Increasingly, arrangement fees are also used as a way of subsidising the interest rate. The arrangement fee can vary from nothing up to several thousand pounds. Sometimes it's calculated as a percentage of the mortgage amount. In most cases it's a flat rate, and in general, the higher the arrangement fee the lower the interest rate you ought to expect. High arrangement fees are not necessarily bad because sometimes the trade-off is that you have a really low interest rate, but you do need to evaluate the mortgage, taking into account the arrangement fee, the interest rate and any other fees.