Which? calls on the Chancellor to end mortgage confusion

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 lowestinterest 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.

Notes to editors:

1.    More than 33,600 people have signed up to support the Stop Sneaky Fees and Charges campaign to put an end to fees across the financial sector that are hidden, excessive or make the total cost difficult to understand and compare. People can sign up to our campaign here: www.which.co.uk/sneakyfees

2.    Lenders are required to display the APR under the EU Mortgage Credit Directive (2014). However, Which? believes that other information could be displayed alongside this to help consumers make better decisions.

3.    Below are some examples of the fees borrowers may come across when taking out a mortgage:


Fees charged before (set-up fees)


Fees charged during the length of the mortgage

Fees charged at the end of the mortgage

Administration Fee Porting Fee  Mortgage Account Fee
Application Fee Transfer of Title Fee Mortgage Exit Admin Fees Total
Letting Property Fee Arrears Fee Deeds Release Fee
Assessment Fee Arrears Letter Fee Release of Part Security Fee
Chaps Transfer Fee  Conversion of Mortgage Type Fee Redemption Admin Fee
Arrangement Fee Copy Statement Fee Final Repayment Fee
Insurance Fee Deeds Enquiry Fee Sealing Fee
Reservation Fee Unpaid Standing Order Fee Redemption Fee
Mortgage Reference Fee Mortgage Term Change Fee
Product Fee Solicitor Arrears Fee
Booking Fee Repossessed Property Fee
Revaluation Fee Unpaid Direct Debit Fee
Reinspection Fee Unpaid Cheque Fee
Lenders Fee Unpaid Ground Rent Fee  
Withdrawal Fee Arrears Breakdown Fee  
Completion Fee    
Mortgage Questionnaire Fee


4.    Full scope of limitations we identified with the APR:

APR is not an accurate indicator of total overall costs of a mortgage product

·         The calculation of APR assumes the lender’s standard variable rate (SVR) won’t change during the term of the mortgage, and therefore does not show the impact of increases (or decreases) in SVR over time.

·         In addition, post-application fees are not included in the calculation even where they are unavoidable.

APR does not account for the high likelihood of switching during at least some point in the term

·         APR assumes people will keep the same mortgage for the whole term (usually 25 years), with fees spread over that period. However, many borrowers do not hold their mortgage for the whole term. Previous research has shown that consumers, on average, remortgage every 5 years. According to the Which? customer satisfaction survey [March 2014] 40% of those surveyed reported having remortgaged in the last five years, with their average mortgage tenure being 7.9 years.  

APR is not appropriate for ranking the costs of fixed-rate deals

·         Other costs incurred when switching mortgage products (for example, the impact of additional set up fees) are not designed to be captured within the APR calculations and need to be factored in separately. Additional charges like set-up fees can quickly add up if a consumer remortgages every few years. For example, if a borrower with a £200,000 mortgage, over a ten year period, were to switch their mortgage deal every two years – keeping a rate of 1.99% but paying £1,500 in arrangement fees with every switch, over a ten year period they would accrue £6,000 of costs not anticipated by the initial APR on the first mortgage they took out.

5.    Additional findings from the report reveal:

·         Mortgage holders spend £1 in every £5 (18%) of their household spend on mortgage payments

·         Nearly two thirds (64%) of mortgage holders also say they are worried about mortgage rates


6.    Methodology

APR research: Populus, on behalf of Which?, interviewed 2,042 GB adults online between the 15th and 17th August 2014. Data were weighted to be demographically representative of all GB adults. Populus is a member of the British Polling Council and abides by its rules.

Tracker data: Populus, on behalf of Which?, interviewed 2,251 UK adults online between the 17th and 18th September 2014. Data were weighted to be demographically representative of all UK adults. Populus is a member of the British Polling Council and abides by its rules.

Mortgage holders research: Populus, on behalf of Which?, surveyed 4,170 UK adults online between 18th and 22nd December 2013, Of the sample, 409 people had taken out their first mortgage or had remortgaged in the last five years and were the main or joint decision-maker. Data were weighted to be demographically representative of all UK adults. Populus is a member of the British Polling Council and abides by its rules.

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