|
BankruptcyNews
Junior Member
358 Posts |
 Posted - 26 February 2007 : 11:00:03
|
Lib Dems rap high mortgage fees
Two Liberal Democrat MPs have accused some mortgage lenders of "tricking" people into taking out mortgages with very high arrangement fees.
The MPs say the fees are often linked to artificially low introductory interest rates, which put the mortgages at the top of "best buy" tables.
They attack the Halifax for advertising a deal at 1.99% interest for a year, but also charging £1,999 up-front.
The Council of Mortgage Lenders denied its members were tricking customers.
"Deals with high arrangement fees may not suit everyone, but those borrowing large sums could find that a high fee is more than offset by the savings they make in interest payments," said Bernard Clarke of the CML.
The two MPs - Steve Webb and Vince Cable - attacked this latest lending gimmick in an early day motion in the House of Commons - a traditional method for MPs to express an opinion, but which will have no effect on the law.
"Many consumers may be drawn to an advert by a low headline interest rate, but not fully appreciate that once account is taken of the astronomical arrangement fee, the product may not be good value for money," said Steve Webb.
"Lenders are clearly setting out to trick people," he claimed.
This was rejected by a Halifax spokesman, who said all its mortgage adverts were very clear.
"All of the rates relevant to this product are given exactly the same prominence in our advertisement," he said.
"It is extremely unlikely - almost impossible - that any customer could make a mistake about either the initial rate or the 'go to rate' or the APR," he added.
Once upon a time, arrangement fees for mortgages were modest, often around £250.
It's been done to stop people switching when their short-term mortgage deals expire
Andrew Hagger, Moneyfacts
But Andrew Hagger, of the financial information service Moneyfacts, said the marketing approach of lenders had been changing in the past 18 months.
"Initially lenders were trying to play the 'best buy' tables," he said.
"But more recently, it's been done to stop people switching when their short-term mortgage deals expire."
According to Moneyfacts, the average mortgage arrangement fee has now risen to about £575.
Mr Hagger pointed out that if borrowers cannot afford the fee, lenders will usually add it to the mortgage, which means interest is charged on it for the life of the mortgage.
Astronomical
Since the autumn of 2005, the main financial regulator, the Financial Services Authority, has been scrutinising the fees levied by mortgage lenders, both when a home loan is set up and when it comes to an end.
The FSA recently took action against the growing trend for lenders to raise mortgage exit fees above the level originally agreed by the borrowers.
The two Lib Dem MPs claimed that the use of high arrangement fees to subsidise a cheap introductory mortgage rate might mislead some people into taking on an unsuitable loan, once the fee was properly factored into the overall cost.
To counter any misleading impression, they said, lenders should highlight their fees as clearly as their interest rates.
The fee of £1,999 currently advertised by the Halifax on one deal is, in fact, a relative rarity. Even now, most such fees are still below £1,000.
Most of the Halifax's current range of mortgages carry much lower fees and some have no arrangement fees at all.
SOURCE: BBC News
See my Blogs:
http://bankruptcynews.blogs.bankruptcyhelp.org.uk |
|
Lib Dems rap high mortgage fees
