Mortgage booking fee? Martin Lewis on his programme last night

Clients looking to reserve a new deal to lock in a lower rate now ahead of their fixed term end date may need to pay a booking fee to do so. Some lenders allow clients to reserve a new deal up to six months before their deal end date but this may come with a fee of between £195 to £1495. (and potentially much higher for Buy to let deals) I am reviewing my clients existing mortgage, and future circumstances to see if it is best to wait, reserve a new deal now via a product switch, or remortgage away from their existing lender, penalties and all!, to secure a good low rate longer fixed term deal. All options should be considered in line with clients short, medium and long term plans and I'll stress it again, independent whole of market mortgage advice is vital to ensure your mortgage decisions do not come back to bite you in the future.

"In a word, we 'sometimes' recommend them if it saves the client money overall. Ultimately it's really important that we don't get fixated on rates, it's what costs the client the least overall that matters and that's where a broker comes into their own. For most clients it would make sense to pay a booking fee if it saved them in excess of that fee in interest over the duration of their fixed rate. On the flip side, if the booking fee is more than the interest saved you may as well chuck your money down the drain."

"Booking fees are a lot less common than they used to be and in many cases you can actually secure a rate without paying anything upfront. Most lenders have replaced booking fees with arrangement fees, the key difference being that arrangements fees can be added to the loan so you can walk away from an application without committing anything financially. You can secure a new rate up to 6 months ahead of your current one expiring and in some cases as far as 9 months away."

"Booking fees are generally a few hundred pounds and paid on application to the lender, sometimes instead of, but sometimes as well as, a valuation fee. Lenders may also charge a larger arrangement fee, which can be paid upfront or added to the mortgage account in many cases. Fees, in whatever form, charged by the lender simply form an overall part of the pricing model; so we often see lenders offering two or three deals that could be appropriate for a client's needs, for example; a 5-year fixed rate that will have a no-fee option with a 3% rate, a 5-year fixed rate with a £495 fee and a 2.75% rate, and another 5-year fixed rate with a £999 fee and a 2.5% rate, all from the same lender. Which is the "best" deal is then dependent on the loan size: the larger the loan, the more benefit there is to paying the fee and taking the lower interest rate, the smaller the mortgage the more advantage there is in taking the higher rate and not paying a fee. Part of the mortgage broker's job is to look at these factors to be able to recommend the most appropriate and cost-effective mortgage for a client's needs and circumstances, so this is the sort of thing we look at on each and every case."