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Worst of best

Best-buy tables are vital tools for brokers and are also useful for consumers. However, best-buy tables are not an even playing field. The trend to charging extortionately high arrangement fees means products at the top of the short-term residential best-buy tables work out to be far less attractive once this extra cost is factored in.

Take, for example, two-year fixed-rate tables, which are the worst offenders. Portman, Northern Rock and Bristol & West are all charging 1.5 per cent of the mortgage amount on rates ranging from 4.48-to 4.59 per cent. Once the fee is factored in, it is the equivalent of taking the rate up to 5.23-5.34 per cent a year – transforming an attractive rate into a far less attractive one.

The biggest lenders are not immune. Halifax has just launched a two-year fix at 4.49 per cent, with a 1,499 fee.

Such a move has nothing to do with transparency or simplicity, which is what we are supposed to be concerned about.

Overhangs, or extended redemption penalties, were the old problem lurking in the tables. After some campaigning, such products were removed from tables. They are still around but much less prevalent.

Huge fees are a return to those dark days when it was difficult to compare mortgage products. Lenders will argue it is up to the broker to explain to clients the effect of the fee but that is just passing the buck.

One of the most important developments in the buy-to-let market has been the introduction of higher fees as a trade-off for cheap mortgage rates. It means it is no longer necessary to pay such a premium for aBTL loan compared with residential , which is good news for landlords.

When exceptionally high fees appear in the residential mortgage best-buy tables, it smacks of opportunism. Bigger fees in BTL may help landlords with cashflow but a lender charging through the nose to offer a rate that takes them to the top of the residential tables is being rather less helpful, particularly as the biggest fees are on two-year fixes, which desperate first-time buyers and those on a budget are most likely to opt for.

No worries about a 1.5 per cent fee, lenders might argue, as you can add it to the mortgage. But that is potentially 25 years of paying off the interest, turning a reasonably cheap mortgage into a far less attractive one. Mortgages with extended penalties were dumped from best buy tables for being unfair. These deals should go the same way.


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