It's a very specific product for Skipton Retention customers where no other products from Skipton or other lenders will fit their circumstances. The reality is barely anyone will be having to use this. It's not a flat 12k product fee, it's 4% of the loan amount.
I imagine Skipton introduced it while rates were super high to give an option to existing customers whose mortgage would become unaffordable for them on the normal product transfer rates. Allowing them to essentially kick the interest down the road by adding it to their loan as a 4% fee while limiting the monthly payment increase in the short term.
Totally makes sense what you're saying as I'm having to go through a similar remortgage where the fee is a bonkers £8000, but I'm forced into this due to the lending circumstances. Was explained to me that the stress test is less stringent because of the fee which helps in my scenario of remortgaging a BTL.
My broker told me he had a client who recently had to just suck it up and take on a £27000 fee on their mortgage as with the current financial climate there were simply no other lenders willing to lend on those particular circumstances.
Ultimately it just gets added to the mortgage. In all the mortgages I've had no interest is calculated on the fee, but as soon as you remortgage the next lender will include this fee in the mortgage.
The ex broker here. This is a genuine query I'm not trying to catch you out.
Is this product designed to overcome the requirement that the FCA wants lenders to provide products for clients who would otherwise be mortgage prisoners like a lot of old Northern Rock borrowers who took 100%+ deals?
Oh! Thanks. Haven't worked since dec2019 and there was nothing sorted fo mortgage prisoners back then. Mind most seemed to have adverse credit too though so it would be difficult to place them even if products existed
I’ve probably seen 1,000 mortgage offers, I’ve never seen one with a product fee more than 2,000 and that was a pricey property.
It may surprise you, but I’ve seen banks make mistakes too, I’m sure everyone has.
Fees are usually tapped onto the mortgage, I cant guarantee it’s an error, but I can’t imagine anyone would want to tap on £12,000 in fees onto their mortgage. This is over 6 months of mortgage repayments.
Odds are it’s an error.
It’s not logical to add on 12,000 of additional fees, they could just add a couple of percentage points on the mortgage to cover this. It’s all getting repaid on the mortgage anyway.
It’s not like insurance where you increase the excess to get a lower figure.
When interest rates are this high it makes complete sense... People who can't afford the extra repayment would rather wait until things are back to normality and take a higher fee later on even though it costs more money it's better than defaulting on your house.
It's not an error - when you accept the mortgage, someone from Skipton Building Society visits you with the finest pork pies and cheese, you have a wonderful day with them, before they take you on a spa day at the nearby Coniston Hotel, to relax you before you enter into the mortgage.
They then spend the remaining £11,000 partying at their head office because they can't believe a dumb fuck really agreed to a £12,000 product fee.
I would wonder about that. Would they be allowed to charge such a fee by the FCA? As we had the shoe on the other foot.
A guy posted here last week that a bank had offered him a 20k 4year loan at....0% interest. 3 weeks later the bank rang him to dispute the loan as it was "an obvious error" and would not have been offered otherwise. I wonder how it went!
Around £1500 is not uncommon, most lenders do a mix of lower fee-higher rate and higher fee-lower rate products. If you've got a big mortgage or might be worth paying the higher fee to save on the interest, if you've got a small mortgage it might be worth paying the higher rate to save on the fee.
This…
But you generally end up with more debt at the end of the 2 years.
It is basically for people that would lose their homes if they didn’t do it. Although yes, this is obviously just kicking the can down the road
If you're adding the fees to the mortgage then £12,000 over 2 years is not £500/month, because you'll be paying interest on that portion as well as the £300k.
Not strictly true. Ive had fees added before where they stipulate in the agreement that no interest is calculated on the fee portion.
The problem happens later on when you remortgage once your deal ends where they now include the fee as part of the mortgage total, so you begin to pay interest on that once the new deal kicks in. There might be a way to pay the fee off first, but I've never tried to do this myself personally.
12k is nuts. I can only imagine it's for huge mortgages where the higher interest of other offerings would add up to more. It doesn't make sense to go for it for a smaller mortgage. I learnt this when I almost went for the £1499 fee option assuming it would be less over the 5 year term, but when I used a mortgage calculator I found it was cheaper to go with a higher interest rate.
Yes I used a mortgage advisor last time and will be speaking to the same person again this time. It’s just not quite time yet. I was looking online to get a sneak peak.
This feels like either an error, or (possibly) a special rate for very very large mortgages. If you were borrowing £20m then the large fee is a lot less important compared to the lower monthly payments.
Possibly I’m wrong though and it is a legitimate deal. If you add the fees to the mortgage then it just gets paid off over the entire length of the mortgage, not just the fixed deal, so it is definitely possible for the mortgage to be higher at the end of the fix than the start in weird cases like this.
Use a mortgage broker that doesn't ask for money from yourself and gets a commission from the lender.
They can normally access better products for you.
Sounds like you are talking about BTL as I haven't seen fees this high with resi.
The answer is, to lower your monthly payments so you can borrow more. A lot of BTL landlords were/would have struggled to refinance when interest rates went up so lenders solution was to add a high fee at a lower rate so the monthly payments are lower, thus making it affordable. The highest I've seen is 7% product fee with the likes of Kent Reliance and LandBay.
Unrelated with topic but genuine question, why product fee of £999 is same with 2 or 5 year mortgages? If someone renews every two year needs to foot that bill more often.
The bank's costs are the same - they need to decide what valuation method to use (drive by vs remote), pay the valuer, review your documents, run credit checks, set up your account. Maybe the 2 year customer will phone in once and the 5 year customer will phone in twice.
A lot of the time it's not worth paying the £999 fee for a 2 year fixed, 5 year you're making the interest saving over 60 months so it's more likely to have a benefit. It's not just the £999 fee you're paying, it's the interest rate as well. If you save more than £999 interest over the fixed term for going with a product with a fee then it doesn't matter how often you pay it.
They’re all options and they all depend on your break even point of your mortgage. The value you borrow and the time it’s fixed for will provide the answer to the true value of the product.
>£300k at 3.42% is £855/month.
>But the repayments are £1334/month.
>So actually, at the end of the 2 year fixed term my mortgage would actually be bigger than at the start.
£1334 is a bigger number than £855 so no, your mortgage would be smaller after 2 years than it was at the start as you're paying more than the interest each month.
I think OP has phrased it badly, the mortgage looks like it's interest only, and the added fee equates to adding another 500 a month, but they're probably going to add the fees to the principle rather than pay it up front. So if it's interest only, they'll add 12k to 300k, which won't be paid off during the 2 year fix.
That was my first thought but £1334-500 is £834 not £855, which is what made me think the £1334 was the capital+interest repayment.
Obviously adding £12k to the mortgage is going to make it more, but you don't pay anything off when you go interest only whether it's 2, 5, 10 or 100 years regardless
My 5 year fix ends this summer. My broker told me theres currently an option with 3.8% interest and a high 3-figure fee.... For most people this would be cheaper overall than 3.42% with a 5-figure fee.
I think it's to manipulate the pay rate to appear to stay within acceptable parameters.
You'll likely find that there's a higher interest rate with lower fee product but when you average out the fee and interest paid over say 5 years it evens out.
Eg. And I'm too tired to use real numbers -
You can have 4.5% rate plus £9,000 fee or 5.5% rate with £1,000 fee. When the bank does its affordability thing, how much do you spend on car finance and Netflix they might find that you can't afford 5.5% so can't offer you that product. But they can offer you 4.5% to stay within affordability criteria. In order to still be profitable they need to have a fee of £9,000 which is added to the loan so by-passes the affordability test.
It's a very specific product for Skipton Retention customers where no other products from Skipton or other lenders will fit their circumstances. The reality is barely anyone will be having to use this. It's not a flat 12k product fee, it's 4% of the loan amount. I imagine Skipton introduced it while rates were super high to give an option to existing customers whose mortgage would become unaffordable for them on the normal product transfer rates. Allowing them to essentially kick the interest down the road by adding it to their loan as a 4% fee while limiting the monthly payment increase in the short term.
I actually love Skipton for this. They’ve a long track record of excellent, innovative products that I’ve not seen anyone else close to matching.
!thanks Someone with good sense provides the useful answer Some high value mortgages may have needed this to weather the storm
The only right answer here! Crazy how so many others just jump to conclusions lol.
Yes it is annoying. Probably the same people who frequently say on this sub "you don't need to use a mortgage adviser, it's easy to sort out yourself"
Its also a bit of a Marketing ploy, give a ridiculously low rate and get a mention in the Telegraph for people to cream over.
> cream 😂
Totally makes sense what you're saying as I'm having to go through a similar remortgage where the fee is a bonkers £8000, but I'm forced into this due to the lending circumstances. Was explained to me that the stress test is less stringent because of the fee which helps in my scenario of remortgaging a BTL. My broker told me he had a client who recently had to just suck it up and take on a £27000 fee on their mortgage as with the current financial climate there were simply no other lenders willing to lend on those particular circumstances. Ultimately it just gets added to the mortgage. In all the mortgages I've had no interest is calculated on the fee, but as soon as you remortgage the next lender will include this fee in the mortgage.
The ex broker here. This is a genuine query I'm not trying to catch you out. Is this product designed to overcome the requirement that the FCA wants lenders to provide products for clients who would otherwise be mortgage prisoners like a lot of old Northern Rock borrowers who took 100%+ deals?
No, the max LTV on these range of products is 90%. There will be seperate products for Mortgage prisoner customers.
Oh! Thanks. Haven't worked since dec2019 and there was nothing sorted fo mortgage prisoners back then. Mind most seemed to have adverse credit too though so it would be difficult to place them even if products existed
Can you post a picture? I’ve never seen anything with fees beyond 999
https://tinypic.host/image/IMG-6532.FBv0E
Not seeing that on Skipton's website, the lowest on offer there seems to be 4.93% with £1495 fees for a 50% LTV (£500K property with £250k mortgage).
Wow, has to be an error.
^ Person Immediately assumes that the highly regulated bank is wrong and they are right.
I’ve probably seen 1,000 mortgage offers, I’ve never seen one with a product fee more than 2,000 and that was a pricey property. It may surprise you, but I’ve seen banks make mistakes too, I’m sure everyone has. Fees are usually tapped onto the mortgage, I cant guarantee it’s an error, but I can’t imagine anyone would want to tap on £12,000 in fees onto their mortgage. This is over 6 months of mortgage repayments. Odds are it’s an error.
Think critically…. Why might someone want a lower interest rate in exchange for more up front fees… Hint hint, affordability checks…
It’s not logical to add on 12,000 of additional fees, they could just add a couple of percentage points on the mortgage to cover this. It’s all getting repaid on the mortgage anyway. It’s not like insurance where you increase the excess to get a lower figure.
When interest rates are this high it makes complete sense... People who can't afford the extra repayment would rather wait until things are back to normality and take a higher fee later on even though it costs more money it's better than defaulting on your house.
It's not an error - when you accept the mortgage, someone from Skipton Building Society visits you with the finest pork pies and cheese, you have a wonderful day with them, before they take you on a spa day at the nearby Coniston Hotel, to relax you before you enter into the mortgage. They then spend the remaining £11,000 partying at their head office because they can't believe a dumb fuck really agreed to a £12,000 product fee.
I would wonder about that. Would they be allowed to charge such a fee by the FCA? As we had the shoe on the other foot. A guy posted here last week that a bank had offered him a 20k 4year loan at....0% interest. 3 weeks later the bank rang him to dispute the loan as it was "an obvious error" and would not have been offered otherwise. I wonder how it went!
I reckon that’s meant to be £1,200.
Not really Sonia is higher than 3.42% so the £12000 is their expenses and profit on the loan they're taking upfront.
Yeah that makes sense
You've not looked for BTL by mistake have you?
Wow! Thanks for posting, either an error or they’re trying their luck
Seen plenty of 1499s and even as high as 2999, but 12k is nuts.
Virgin have a product with a £1,595 fee at the moment but I’ve never seen anything near that.
Around £1500 is not uncommon, most lenders do a mix of lower fee-higher rate and higher fee-lower rate products. If you've got a big mortgage or might be worth paying the higher fee to save on the interest, if you've got a small mortgage it might be worth paying the higher rate to save on the fee.
Usually the fee is added to the loan. So you won’t be paying back £500pm but the interest rate on £312k
This… But you generally end up with more debt at the end of the 2 years. It is basically for people that would lose their homes if they didn’t do it. Although yes, this is obviously just kicking the can down the road
[удалено]
How does that work when the fee is a % and not a fixed 12k then? Stop assuming things that you don't know.
If you're adding the fees to the mortgage then £12,000 over 2 years is not £500/month, because you'll be paying interest on that portion as well as the £300k.
Not strictly true. Ive had fees added before where they stipulate in the agreement that no interest is calculated on the fee portion. The problem happens later on when you remortgage once your deal ends where they now include the fee as part of the mortgage total, so you begin to pay interest on that once the new deal kicks in. There might be a way to pay the fee off first, but I've never tried to do this myself personally.
Just pick literally any other deal then? This one isn't for you, shrug, find a better one.
If Isaac Newton started talking to you about falling apples, you would tell him to just pick literally any other tree to sit under!
And if he was on a Personal Head Injury Avoidance subreddit, I think that would be good advice!
Well of course, I just wanted to understand it.
It's why we are making plans to sell at the end of our 5 year fix which is next Jan
12k is nuts. I can only imagine it's for huge mortgages where the higher interest of other offerings would add up to more. It doesn't make sense to go for it for a smaller mortgage. I learnt this when I almost went for the £1499 fee option assuming it would be less over the 5 year term, but when I used a mortgage calculator I found it was cheaper to go with a higher interest rate.
I’d get a mortgage advisor. They are the best at looking into this. They also usually take their payment from the mortgage lender.
Yes I used a mortgage advisor last time and will be speaking to the same person again this time. It’s just not quite time yet. I was looking online to get a sneak peak.
Always good to get in there early and see. My wealth manager thinks that rates will be below 4% by next year in the UK.
This feels like either an error, or (possibly) a special rate for very very large mortgages. If you were borrowing £20m then the large fee is a lot less important compared to the lower monthly payments. Possibly I’m wrong though and it is a legitimate deal. If you add the fees to the mortgage then it just gets paid off over the entire length of the mortgage, not just the fixed deal, so it is definitely possible for the mortgage to be higher at the end of the fix than the start in weird cases like this.
Use a mortgage broker that doesn't ask for money from yourself and gets a commission from the lender. They can normally access better products for you.
Go through a broker. Fees shouldn't be anywhere near that.
Its preadatory practice, at this point you might as well class them as a loan shark.
Sounds like you are talking about BTL as I haven't seen fees this high with resi. The answer is, to lower your monthly payments so you can borrow more. A lot of BTL landlords were/would have struggled to refinance when interest rates went up so lenders solution was to add a high fee at a lower rate so the monthly payments are lower, thus making it affordable. The highest I've seen is 7% product fee with the likes of Kent Reliance and LandBay.
No I’m talking about renewing my residential mortgage for the house I live in.
Ah odd, same thing still applied though.
Unrelated with topic but genuine question, why product fee of £999 is same with 2 or 5 year mortgages? If someone renews every two year needs to foot that bill more often.
The bank's costs are the same - they need to decide what valuation method to use (drive by vs remote), pay the valuer, review your documents, run credit checks, set up your account. Maybe the 2 year customer will phone in once and the 5 year customer will phone in twice.
A lot of the time it's not worth paying the £999 fee for a 2 year fixed, 5 year you're making the interest saving over 60 months so it's more likely to have a benefit. It's not just the £999 fee you're paying, it's the interest rate as well. If you save more than £999 interest over the fixed term for going with a product with a fee then it doesn't matter how often you pay it.
They’re all options and they all depend on your break even point of your mortgage. The value you borrow and the time it’s fixed for will provide the answer to the true value of the product.
>£300k at 3.42% is £855/month. >But the repayments are £1334/month. >So actually, at the end of the 2 year fixed term my mortgage would actually be bigger than at the start. £1334 is a bigger number than £855 so no, your mortgage would be smaller after 2 years than it was at the start as you're paying more than the interest each month.
I think OP has phrased it badly, the mortgage looks like it's interest only, and the added fee equates to adding another 500 a month, but they're probably going to add the fees to the principle rather than pay it up front. So if it's interest only, they'll add 12k to 300k, which won't be paid off during the 2 year fix.
That was my first thought but £1334-500 is £834 not £855, which is what made me think the £1334 was the capital+interest repayment. Obviously adding £12k to the mortgage is going to make it more, but you don't pay anything off when you go interest only whether it's 2, 5, 10 or 100 years regardless
My 5 year fix ends this summer. My broker told me theres currently an option with 3.8% interest and a high 3-figure fee.... For most people this would be cheaper overall than 3.42% with a 5-figure fee.
I think it's to manipulate the pay rate to appear to stay within acceptable parameters. You'll likely find that there's a higher interest rate with lower fee product but when you average out the fee and interest paid over say 5 years it evens out. Eg. And I'm too tired to use real numbers - You can have 4.5% rate plus £9,000 fee or 5.5% rate with £1,000 fee. When the bank does its affordability thing, how much do you spend on car finance and Netflix they might find that you can't afford 5.5% so can't offer you that product. But they can offer you 4.5% to stay within affordability criteria. In order to still be profitable they need to have a fee of £9,000 which is added to the loan so by-passes the affordability test.