Articles > Booking fees and Arrangement fees

Most mortgages come with a number of different fees. These normally include a booking or arrangement fee.

What are they though? Well, technically, they do each have their own definitions.

Booking fee. This fee is normally paid to lock in a rate on a mortgage when the application is made, especially if it is a fixed rate mortgage.

It is important to note, though, that fixed rate mortgages that do not have booking fees typically lock the rate in when the application is submitted anyway.

Arrangement fee. Quite simply, this is defined as an administrative fee when the mortgage is submitted.

Not any clearer? While the above definitions do exist, it is commonly held that the real reason for the existence of the above fees is to provide mortgage lenders with a tool for keeping their rates down.

A year ago, typical booking/arrangement fees were between £400 and £700. Now, they are commonly in excess of £700 and can go up to £2000.

You might ask yourself who would pay such a ridiculously large fee. Well, it does make sense when the loan is particularly large. Any advantage in a lower interest rate will offset the higher fee.

Also, commonly, these fees can often be added to the loan.

This has the advantage of freeing up cash during a purchase. The downside is that you will be paying interest on the additional borrowing, normally at the lender's standard variable rate, rather than at the headline rate.