Mortgage lenders have pledged to abolish confusing terminology for different types of fee and instead introduce a standard “tariff of charges” to make it easier for borrowers to compare deals.
Brokers have welcomed the move, which follows a Which? campaign to end the confusion around mortgage costs. Chancellor George Osborne asked the Council of Mortgage Lenders and Which? to work together to find ways to make it easier for consumers to understand and compare the costs of different mortgages with different lenders.
The outcome of the work is a new tariff of charges in which lenders have agreed to use the same terms to describe the fees they levy, the Which? research having revealed that borrowers found the range of terminology confusing. The tariff also introduces a common format, whereby each lender will list fees in the same order and with the same descriptions to aid like-for-like comparison.
The new tariff has been tested on consumers and results show they found it much easier to understand and compare costs than when they had used existing versions.
Lenders representing 85 per cent of the market have already committed to introducing this tariff and putting it on their website by the end of the year and the CML and Which? anticipate that other lenders will also choose to adopt it.
The two bodies have submitted a joint report to the Chancellor outlining the work on the new tariff as well as progress towards making it easier for people to compare the total costs of products over different deal periods. The CML and Which? say they will continue to work together to help consumers and plan to agree a standard comparison method early next year for lenders to adopt in 2016.
Which? executive director Richard Lloyd says: “Thousands of people supported our call to end confusion around the cost of mortgages so we’re pleased that our work with the CML has resulted in simplified fees and charges.
“This new approach should make it much easier for people to compare mortgage fees. We hope that all mortgage providers will make these changes as soon as possible.”
CML director general Paul Smee says: “Lenders have successfully pulled together to put in place some sensible measures to help consumer understanding. We hope the new tariff and standard terminology will make it demonstrably easier to understand and compare mortgage costs. Working jointly with Which? has been invaluable.”