Which? Calls on the Chancellor to End Mortgage Confusion

3rd November 2014

We reveal that borrowers could be paying over the odds on their mortgages and call on George Osborne to use his Autumn Statement to Stop Sneaky Fees and Charges on mortgages and make it easier for people to find the best deal.

Our latest research on the mortgage market uncovers the complex and unclear mortgage fees and charges facing consumers.

We found:

More than 40 fees and charges across the market, including set up fees, arrears fees and final repayment fees.
Providers using different names for the same or similar fees - a booking fee can also be called a reservation or application fee.
Duplication with some lenders charging more than one set up fee.
Increases to the cost of some fees - the average arrangement fees have almost doubled in the last five years, from £878 in 2009 to £1,588 in 2014.
A wide variation between lenders in the cost of the same fees, suggesting that fees don't always reflect the true cost the lender incurs.
A lack of clarity which makes it difficult for borrowers to tell if the fees are avoidable.
Our research shows that consumers borrowing £100,000 over two years could save as much as £1,503 if they took into account the set up fees rather than choosing the product with the lowest interest rate.​

This vast array of confusing fees and charges, which aren't always reflected in the standard APR (Annual Percentage Rate of Charge), means the total cost is not clear to borrowers leaving them unable to easily find the best deal.

We found just 3% of people could correctly rank the cost of five two-year fixed-rate mortgage deals when displayed using typical information, including APR. This rose to 36% when presenting the total cost of the mortgages over 24 months.

With mortgage repayments the biggest monthly expense for most homeowners, and the prospect of future interest rate rises adding to this, we're calling on the Chancellor to use his Autumn Statement to make it easier for people to find the best mortgage deal, working with the FCA, industry and consumer groups.

Which? executive director, Richard Lloyd said:"Homeowners could be paying over the odds for their mortgage because of the complex range of fees and charges that prevent them from finding the best deal.

"The Chancellor must act now to Stop Sneaky Fees and Charges and end mortgage confusion for consumers. The Government and the regulator should also explore better ways of presenting the total cost of mortgages."

We want George Osborne in his forthcoming Autumn Statement to:

1. Make mortgage price comparison easier: Given the limitations with APR, the Government and the FCA should explore other ways to present the total cost of a mortgage.

2. Make the full cost of a mortgage clearer now: All compulsory fees payable throughout the deal period should be expressed as a total of fees and included in the advertised costs. It should also be clear which fees payable over the life of the mortgage are compulsory and which are not.

3. Ensure additional fees are cost reflective: Non-product fees and charges that are incurred after the purchase of a mortgage should reflect lenders' actual costs.

See Stop Sneaky charges at - http://www.which.co.uk/campaigns/insurance-bank-card-fees/