Glossary · UK
What is Mortgage Arrangement Fee?
A fee charged by a lender for setting up a mortgage deal, which can often be added to the loan itself or paid upfront, and should be weighed against the interest rate when comparing deals.
Full Definition
A mortgage arrangement fee (sometimes called a product fee or completion fee) is a charge levied by a lender for setting up a particular mortgage product, separate from the interest rate itself. Fees vary widely between lenders and products, from £0 on some standard deals to £1,000-£2,000 or more on certain competitively-priced fixed or tracker deals, where the lender effectively offers a lower headline interest rate in exchange for a higher upfront fee. Some lenders also charge a smaller, non-refundable booking or application fee payable at the point of application, on top of any arrangement fee due at completion. Borrowers can usually choose to pay the arrangement fee upfront in cash, or add it to the mortgage loan itself, which spreads the cost but means interest is then charged on the fee amount too over the life of the mortgage, increasing the total cost. When comparing mortgage deals, the lowest advertised interest rate is not always the cheapest option overall once a high arrangement fee is factored in, particularly for smaller mortgage balances where a fixed fee represents a larger proportion of the loan; the Annual Percentage Rate of Charge (APRC), which factors in fees alongside the interest rate over the deal's term, along with a total cost comparison over the specific mortgage term, gives a more reliable like-for-like comparison than the interest rate alone.