Brokers angry at lenders’ “brutal” buy to let arrangement fees

Brokers are up in arms about alleged profiteering by buy to let mortgage lenders’ arrangement fees.

These jumped last autumn as a result of Liz Truss’s mini-Budget, and its subsequent impact on institutional and individual borrowing. Lenders the. introduced higher product fees on BTL mortgages.

Now a survey of landlords and mortgage brokers by news agency Newspage shows high levels of discontent about the fees.

Portfolio landlord Kundan Bhaduri, director of London-based The Kushman Group, is accusing lenders of profiteering and wants government intervention.

He says: “While some argue that these fees are a strategic way to maintain lower interest rates and enhance affordability, it is becoming increasingly evident that they border on profiteering, as they are causing extreme financial distress to landlords. 

“Lenders used to charge around £995 to two per cent in arrangement fees, but they're now not far off £50,000 in some cases.

“It's vital that the government steps in to regulate and curb these exploitative fees. Transparent fee structures and fair competition should be the bedrock of the BTL mortgage market, because right now it's the Wild West.”

Justin Moy, founder of EHF Mortgages, says: “Arrangement fees on BTL mortgages have become brutal since the mini-Budget, with some as high as seven per cent of the mortgage amount. 

“Not only is the fee often staggeringly high, but thousands in extra interest is then charged, too, as the fee is typically added to the loan. No one likes the high fees, but that lower rate and payment each month may be crucial for landlords to make the numbers work.”

Meanwhile Amit Patel, adviser at mortgage broker Trinity Finance, says: “Daylight robbery were the words of one client when I told him that, for the affordability to fit, he would have to pay a seven per cent arrangement fee. 

“A seven per cent arrangement fee on a mortgage of £350,000 equates to £24,500 and this is a serious dilemma for any landlord.”

Another broker, Elliott Culley of Switch Mortgage Finance, adds: “Mare struggling to make any profit and now they are being told to pay high fees to gain access to lower rates. More landlords will sell up, which will pile further pressure on the rental market.”

And Riz Malik, director of R3 Mortgages, comments: “For those landlords aiming for a certain loan size, choices might be limited without lower interest rates, and to achieve those lenders are now having to charge bigger fees. 

“A drop in rates will often expand options for landlords and, for now, the way high arrangement fees are helping improve affordability seems like the status quo.”