A mortgage with a record six-figure arrangement fee was launched this week – it charges borrowers up to £137,500 just to arrange the loan.
Broker John Charcol is offering a two-year tracker deal of 0.01 per cent below the Bank of England base rate, giving a current rate of 4.99 per cent.
But borrowers who want to take out the loan, available on mortgages of between £500,000 and £5 million, will have to pay an arrangement fee of 2.75 per cent of the amount being borrowed, giving a maximum fee of £137,500. It is thought to be the highest arrangement fee ever charged, and the first time a set-up fee has run into six figures.
For those who cannot stomach paying out such a large sum just to arrange a mortgage, the group is also offering a rate of 5.74 per cent with a lower arrangement charge of 1.25 per cent.
Despite the huge arrangement fee, which compares with set-up charges of between 0.25 per cent and 0.5 per cent typically charged by mainstream lenders for loans of this size, Charcol insisted the deal still offered borrowers good value.
Ray Boulger, senior technical manager at John Charcol, said: “Many borrowers will be coming off five-year fixed rates of less than four per cent in the next few months, and many others will be coming to the end of two or three-year fixed or tracker mortgages with rates well under five per cent.
“Switching to a new large loan fixed rate without paying a big fee will mean paying a rate close to seven per cent. Even switching to a new tracker without paying a big fee will mean paying well over six per cent.
“These two deals are designed to accommodate borrowers who cannot easily afford to pay, or can but don’t want to pay, the much higher rates which would be necessary without a big fee being used to subsidise the rate.”
He said the loans were particularly good value for people borrowing more than £1 million.
The group said the so-called effective rate of the mortgages, which prices arrangement fees into the rate charged, was 6.37 per cent for both products, making it among the best deals available.
Both of the mortgages are for people borrowing 60 per cent or less of the value of their home, and there are no early redemption charges, meaning they can make overpayments.
Borrowers also have the option of adding the arrangement fee to the mortgage so they do not have to pay it up front.