Which? response to the Chancellor’s announcement on practical solutions to end mortgage confusion for consumers

Following our campaign calling on George Osborne to use his Autumn Statement to Stop Sneaky Fees and Charges on mortgages, the Chancellor has today announced that the Council of Mortgage Lenders (CML) will work with Which? to consider practical solutions to end mortgage confusion for consumers.

In response, Which? executive director, Richard Lloyd said:

“This is good news for the thousands of consumers who supported our call for the Chancellor to end confusion about the full cost of taking out a mortgage. With so many people on tight budgets trying to get a foot on the housing ladder or looking to remortgage as rates rise, it’s essential that they can more easily find the best deal.

“We look forward to working with the Council of Mortgage Lenders to simplify the wide range of complicated fees and charges in the market so that borrowers don’t pay over the odds on their loan.”

Notes to editors

1. Over the next few months Which? will work with the Council of Mortgage Lenders (CML) to consider practical solutions for the following issues:

a) transparency and presentation of fees and charges to help improve consumer outcomes;

b) standardisation of terminology around fees and charges;

c) consumer education;

d) setting administrative charges so that they reflect the cost to the lender.

HM Treasury will actively scrutinise and track the progress of the work. The industry’s regulator, the Financial Conduct Authority (FCA), will be kept informed of the progress and consulted where appropriate.

We will report on progress by Budget 2015 and look to produce a programme for future action, to be taken forward through industry guidance.

2. More than 45,000 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

3. On 3rd November Which? called on the Chancellor to use his Autumn Statement to Stop Sneaky Fees and Charges on mortgages and make it easier for people to find the best deal.

We wanted him to use the Autumn Statement to:

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.

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.

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.

4.  Our research on the mortgage market reveals borrowers could be paying over the odds on their mortgages due to the range of complex and unclear fees.

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.

5. 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.

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