A collective term for what the lender decides it can get away with charging for doing the paperwork and it comes in many guises.
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Lenders used to charge relatively small arrangement fees, as to do otherwise might lead a borrower to look elsewhere for a better deal.
However, today the lenders are charging massive arrangement fees in an attempt to stop borrowers from jumping from one lender to another and ruining the stability of the lenders “mortgage book” or simply to make up for the lower profit gained from offering a headline grabbing low initial interest rate to get the borrower on board.
An advert displaying an incredibly low interest rate is bound to catch a borrowers eye, whereas an alternative one showing a higher interest rate (but a lower arrangement fee) may not.
Often the arrangement fees will be hidden in the small print unlike the headline interest rate that will be splashed in bold.
If the mortgage deal does not have an arrangement fee (and they do exist) then it will be compensated for by a higher interest rate.
The lender has to make its profit and keep the shareholders happy somehow!
Finally – if an arrangement fee is not showing on the printed page, then perhaps it is simply in a different guise, such as application fee, reservation fee, booking fee, additional survey fee, initial fee etc, etc.