The Royal Bank of Scotland (RBS) is reportedly charging a £995 non-refundable arrangement fee to its mortgage customers whether the potential customer uses the bank directly or a mortgage advisor.

Once the mortgage offer has been produced, regardless of why a mortgage may then not proceed – whether it is the seller that has pulled out or any other reason – the potential customer is still charged the £995, which seems a rather high product fee for this sort of condition.

This move is uncommon in the UK according to Melanie Bien of the mortgage brokerage firm Savills Private Finance, who commented:

“It looks as though it is a way of them making some extra money – £995 is a lot of money, and deals do go wrong. There is no guarantee that one will go through.”

The £995 fee also has to be paid upfront, so any customer who intended to take a RBS mortgage would need the means to pay the £995 upfront in addition to having their deposit.

From mortgage offer to mortgage completion, there are any number of reasons why a mortgage may fall through and not all are down to the buyer; it happens all the time.

It is common for a mortgage lender to charge a booking fee, such as £99 with First Active or Cheltenham & Gloucester, or £150 with the Woolwich, whereby the booking fee is lost if you cancel the mortgage and in general, many lenders do not charge anything.

Mortgage arrangement fees range from around £500 to around £1000 but these are usually refundable until the final stages of the mortgage agreement.

A spokesperson from the RBS said the terms and conditions were clear and the refund is only unavailable following the offer stage.

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