There is obviously a material administrative cost to a lender in originating a home loan but, unlike the position in most countries, it is not market practice here for lenders to charge arrangement fees. For example, French and Spanish lenders typically charge around 1% of the amount advanced as an arrangement fee. Is the absence of arrangement fees here a gimmick?
I have often wondered about this. In the UK, with most lenders you can opt for a mortgage without arrangement fees, or one with arrangements fees and a lower interest rate. The arrangement fee is usually in the order of £900.
For example, with First Direct if you want to borrow up to 80% LTV, you will pay a tracker rate of 2.99% and no arrangement fee, or 2.49% with an arrangement fee. (By the way, that is Bank of England rate +1.99% for the duration of the mortgage)
This seems like a good approach for the customer. If you were borrowing £100,000 you would clearly opt to pay the arrangement fee as you would recover it in just over two years from lower interest.
In general, I am a fan of customers being charged for the service they get. So, I have no problem with companies charging more to customers who pay with credit cards. I don't like free current accounts, as it means that someone else is subsidising them.
So, to get back to your question. I would welcome the introduction of arrangement fees combined with lower interest rates. It's crazy that we are doing the very opposite in Ireland.
Brendan