There has been a lot of talk recently about how mortgage arrangement fees have been going up, with some hitting nearly £2,000. What about an arrangement fee that is nearly £10,000? That is the fee Abbey will charge for its larger mortgages. Industry watchers say this is the first fixed fee to reach nearly five figures. Percentage-based fees have had the capability of reaching big numbers of course.

Most high street mortgage lenders provide mortgages up to £250,000, but this fee is applied to loans of between £500,000 and £750,000 with an interest rate fixed at 5.59% for two years.

James Cotton of broker London & Country said the fee would seem “ridiculously big” to most borrowers. However, Nici Audhlam-Gardiner, head of mortgages at Abbey, said the fee was acceptable, and that the money would be used to offset the cost of arranging the mortgage and enabling them to offer customers a choice.

Higher fees are increasingly added to mortgages with low interest rates which enable lenders to keep their secured loans high in comparison charts. Borrowers have to keep a close eye on all charges involved in mortgages – not just on the headline interest rates.

Other mortgage lenders charge 2% fees on loans over £500,000, which would make for charges of £10,000 and over. For example, Halifax is offering a 5.59% two-year fixed rate mortgage with a 2% over £500,000. On a £750,000 loan the fee would be £15,000. This makes the fixed Abbey fee seem very competitive.

Cotton said: “Borrowers have to do their sums and check that the rate and fee together offer good value. If you are after a big mortgage, don’t just assume you have to pay a huge fee.”

A spokesman for Halifax said: “For some loans, a fixed percentage arrangement fee is much better than a set arrangement fee.”