So called good value mortgage deals attracting homebuyers into switching providers have been disguising huge administration fees, with some lenders increasing their arrangement fees by more than 600% in the last 24 months.

It has been discovered that Banks and Building Societies have simply been misrepresenting their products to score highly in the 'best-buy' tables by appearing to have lower interest rates than their competitors. 

What they have actually been doing, is passing these savings for the consumer onto their arrangement fee, so in reality, consumers are in some cases no better off than they would be under normal circumstances.

An investigation by the 'This Is Money' website discovered that Intelligence Finance, a subsidiary of Halifax, the largest mortgage lender, charged a whopping £2999 as an arrangement fee for their mortgage products.  Further research showed that this was an immense 601% growth on the maximum it charged consumers for the same or similar products a mere 24 months ago.

Common sense dictates that the cost of 'arranging' a mortgage will not have risen by £2500 in such a short time, if anything, with the increased reliance on automated computer systems a good arguement could be made that such arrangement costs have in fact reduced over the past few years and this increase can only have come around to offset any losses by lowering their product interest rates so they appear more competitive and consumer friendly.

The article quoted Lisa Taylor of personal finance website, Money Facts, who insisted that the lenders are simply using smoke and mirrors to lure consumers to them and whilst offering them savings with their left hand, taking back with their right.

"Lenders know that people tend to judge mortgages based on the headline interest rate".

"Consequently, they can use this to offer what appears a good home loan only then to introduce the arrangement fee as a sting in the tail".

"The fees have soared in the last few years, but there has been no increase in the amount of work involved to arrange a mortgage.  There is no way the fees can be justified in terms of the work involved."

The largest increase seen is by the Bank who used to say yes.  Scottish Widows, part of Lloyds TSB have hiked their arrangement fees by a staggering 678% over the last 2 years, from a reasonable £275 to £1999.  Other lenders have seen large increases, such as Abbey, Nationwide, Northern Rock and the Woolwich arm of Barclays.

Lenders are also using another tactic to skim profit on top, some are requesting higher arrangement fees on products sold through brokers.  An example being Abbey National; mortgages sold direct to consumers through their branches have a maximum £995 arrangement fee, yet any consumer who uses a mortgage product via a broker will find themselves paying as much as £1499.

Some companies are even charging a percentage based arrangement fee dictated by the size of the loan.  Meaning a consumer who wishes to borrow £500,000 will be paying five times as much as a consumer who wishes to borrow only £100,000.  Give yourself a pat on the back if you can work out where the extra workload comes from in the above examples...I'm sure the Banks and Building Societies may wish to employ you if they ever choose to try and explain this.