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CML and Which? look to diffuse mortgage fees ‘minefield’

The Council of Mortgage Lenders and Which? are looking to simplify the fees imposed by lenders and the way they are disclosed to consumers following Government intervention.

In last week’s Autumn Statement, the Government announced it had asked the CML to work with Which? to improve the transparency of mortgage fees and make it easier for consumers to compare deals.

It comes after Which? called on the Government last month to end “sneaky fees and charges” which it says prevent consumers from finding the best mortgage deal.

In a six-month project, the CML says it will look at: transparency and presentation of fees; standardisation of terminology around charges; consumer education; and setting administrative charges so they reflect the cost to the lender.

The CML and Which? have agreed to provide a progress report to the Government by March, and take forward a programme for action through industry guidance.

Research published by Which? in November found there are more than 40 fees and charges across the market, and lenders use different names for the same or similar fee.

It argued while APR is typically described as ‘the overall cost for comparison’ it is often a poor guide to true overall costs.

The research found when presented with five different two-year fixed-rate mortgage deals, and the typical information disclosed by lenders, just 3 per cent of consumers could correctly rank all five deals in order of cost. Just under half could identify the cheapest deal.

Which? has called on the Government to explore alternatives to APR, ensure lenders include all compulsory fees in a total costs figure which is presented in the advertised costs, and ensure non-product fees reflect lenders’ actual costs.

Middleton Finance mortgage broker Daniel Bailey says: “Comparing fees can be a complete minefield for clients. Often they will see a very low headline rate but once the fees have been taken into account that may not be the best deal for them over a two or five-year period.

“It is a very complex process for consumers to research online, and any steps lenders can take to make things more transparent would be welcome. For instance, it should be clearer what can be added to the loan and what needs to be paid upfront.”


But he argues any changes must be consistent across all lenders to allow consumers to compare like-for-like.

Others argue, however, that transparency is only a major issue in the non-advised market.

Mortgage Concepts Associates director Mike Richards says the main sourcing programmes used by brokers, such as Trigold and Mortgage Brain, compare mortgages by the total amount paid over a certain time period, which includes upfront costs.

“So for any consumer who uses a broker this is not really a problem,” he says.

But Richards agrees consistent language across all lenders would be helpful: “Sometimes you will see a booking fee, which could be exactly the same as an arrangement fee with a different lender, while some fees are charged upfront and some are added to the mortgage.”

Building Societies Association head of external affairs Hilary McVitty says the MMR, which banned non-advised mortgage sales where there is any form of interactive dialogue with a customer, has solved many of the problems Which? raises.

She says: “We do recognise it can be hard for some customers to work out which is the best deal for them – particularly as so many make decisions based on headline rates rather than total cost.

“That said, much of this issue has been addressed by the fact that under the MMR virtually all mortgage sales are fully advised.”

McVitty adds: “All the information mentioned by Which? is disclosed either in the Key Facts Illustration document or in a lender’s tariff of charges – it is about ensuring that customers have the right information in the right format at the right time.”

Comparison site currently only allows users to sort mortgages by brand or by the initial interest rate. But it says it plans to introduce an option to sort by overall cost early next year.

A spokesman says: “We do show total costs as part of the comparison and we emphasise to consumers the importance of taking fees and charges into account rather than just the initial rate.

“At the moment customers cannot sort by overall cost but that is something we are looking to address.”

Which? executive director Richard Lloyd says: “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.

“We look forward to working with the CML to simplify the wide range of fees in the market.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Derek Bradley ceo Panacea Adviser 11th December 2014 at 5:00 pm

    A very good initiative, but, I get a little worried when a ‘consumer champion’ is also a mortgage broker. The cynic in me sees this as a great way to get the phones ringing at Which Mortgage Advisers.

    Hey ho!

  2. Why are CML favouring Which? mortgage brokers with this? Which? will use the positive press to gain an unfair advantage over other competitors. Which? should continue to be a consumer champion fi that is what they are but take themselves out of that role when they enter the market themselves. Utterly outrageous that CML favour this broker alone and above all others.

  3. think you mean ‘defuse’ not ‘diffuse’.

    otherwise, agree with steven above.

  4. Work with Witch? Why? That organisation gives the impression it wants everyone working for the consumer for nothing.

    Frankly, if they know as little about the things I don’t know about as the things on which I am competent, then it’s not worth considering.

  5. Derek Bradley ceo Panacea Adviser 15th December 2014 at 9:22 am

    @norm d’Plume

    Quite the opposite, Which is a mortgage broker and charges as such. You cannot mix being a consumer champion with a charitable tax status and a commercial venture The playing field is not level and the marketing message is skewed with the consumer championing bias

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