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Lloyds moving cost study shows mortgage arrangement fees up 252%

The annual Lloyds TSB Review of the Cost of Moving Home was recently released to the press, and can be read in full here.

On face value, the report is yet more bad news for Home Buyers, claiming that the ‘Cost of moving rises faster than house prices over the past decade’.

A link to 64% increase in house prices? 

The review points out that moving costs have increased in actual terms in all of the 6 main cost categories, and attempts to anchor these increases to the Halifax House Price Index’s statistics that average house prices have increased by 64% between 2001 and 2011.

However, the logic for this link is not entirely clear. Why should moving costs be directly index-linked to house prices?

For example, the cost of a removal company would be better linked to employment, transport and fuel costs, would it not?

Are Estate Agents’ fees to blame?

Lloyds TSB’s report seems to imply that rising moving costs are the fault of Estate Agents, stating in bold, title text that “Estate agents’ fees account for the largest share of the home moving bill“.

The fact that mortgage application fees have trebled in the same period is demoted to ordinary font in the following paragraph, arguing that ‘Despite this increase,  mortgage arrangement fees currently account for just 12% of the typical home moving bill’.

The crucial point here is that Home Buyers have the choice to sell their homes privately.

There are a multitude of ways to sell property privately, and yet people still prefer to sell via an agent.  The only explanation is that people feel that agency offers a valuable service that they are willing to pay for.

Banks’ Mortgage Application Fees – the unexplained reason for rising costs?

The research explains that mortgage application fees have trebled over the past 10 years, but that this is due to the ‘changing structure of mortgage products over the period‘.

Unlike the choice of whether or not to use an agent, these fees are a different prospect entirely.  Borrowers simply have no option but to pay mortgage application fees in order to secure access to a mortgage.

What about Stamp Duty?

Stamp Duty may certainly also have risen on the average purchase throughout the period, but the billions of pounds used to bail out the collapse of the Lloyds Banking Group have to be replenished somehow don’t they?

Forgive my glibness, but it appears that there is considerable bias at play here, when considering the three main costs of moving. Lloyds TSB’s review highlights and blames, unfairly in my view, the estate agents, and seeks to hide the true cost and impact of the direct and indirect rises associated with the banks’ own activity.

The Lloyds TSB Report Data

Estate Agency Fees – up 64%

Estate agents fees have predictably increased in line with house prices, as most continue to work on a 1 – 1. 5% basis.

Stamp Duty – up 64%

Stamp Duty similarly has increased in line – also showing a commensurate 64% increase. This is circumspect however as it does not reflect the various Stamp Duty breaks for First Time Buyers, Disadvantaged areas and so on.  It merely looks at the average house price and calculates the SDLT from there.

In practice, Stamp Duty may have fallen considerably for some buyers.

Conveyancing Fees – up 64%

Conveyancing Fees are cited as having increased by 64% from £572 to £938.  Further investigation into the footnotes of the report reveals that Conveyancing Costs have simply been ‘estimated’. In other words, the report contains not actual research to support the claim!

Any Conveyancing Solicitor’s records will confirm that in both relative and actual terms, Conveyancing Fees have dropped to a fraction of what they were 10 years ago, as the sector has moved online, becoming less localised and much, much more competitive.

Certain 3rd party costs, or ‘disbursements’,  associated with Conveyancing, such as Local Authority searches are disparate in amount, varying by local authority. Even if they are mistakenly considered as ‘Conveyancing Fees’, they still only equate to around £250 at the most for a full search bundle.

Removals – up 38%

Consulting a single removals company, rather than undertaking thorough research, the report claims that removals cost have increased by only 38%. It may be argued, however, that canvassing more than one firm would be more convincing evidence of any rise or fall!

Surveyors – up 35%

Surveyors too are presented as having increased their fees, albeit only by 35%.  For the most part, the only Home Buyers Surveys being sold at £545 (for an average-priced house) are those containing a substantial lender mark up.

Mortgage arrangement – up 252%

Isn’t this the real headline?  This represents only the arrangement portion of the mortgage.

What about a comparison of the banks Standard Variable Rate (SVR) over the same period compared with the Bank of England Base Rate? Or the Inter Bank Lending Rate – Libor?  Surely that data could easily be sourced without the need to ‘estimate’.

In the notes to editors, a table containing the Lloyds TSB Fee Free mortgage rates is incongruously inserted, without explanation.  Presumably this is a purely PR-motivated plug of the banks’ own rates, in the hope that journalists will spread this free advertising which adds nothing to the cost of moving debate.

Hidden Mortgage Arrangement Fees?

A cursory glance at the Lloyds TSB website reveals that most mortgages carry arrangement fees of £995  (plus a £99 application fee, a £265 Mortgage Account Fee, a £400 valuation fee and a £35 fund transfer fee).

A grand total of £1, 794!

Nevertheless, the press have been more than happy to propagate the story without any verification of the facts.

Who cares, as long as it’s more sensational ‘bad news for home buyers’. Bad news sells more papers than good, and they’ll be lining tomorrow’s bins, won’t they?

So what is the bank’s real agenda?

It does seem as though the press will regurgitate more or less anything that is presented to them.  PR agencies, as result, don’t even attempt to conceal the underlying commercial agenda.

Barely one page into the report, and you’ll find a pitch about Lloyds TSB Mortgage products wrapped in an earnest sounding statement that ‘Lloyds TSB continues to respond to the difficulties facing Home Buyers’.

Sadly, this sort of cynical headline-grabbing PR does little to restore confidence in the stagnating property market.

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