Mortgage lenders move to simplify charges
Mortgage lenders have launched a new drive to simplify how they display their fees, following concerns that people were at risk of paying over the odds due to complex charges.
A new tariff, spelling out mortgage fees in a standardised format, has been launched jointly by the Council of Mortgage Lenders (CML) and consumer group Which?
Research by Which? in 2014 found more than 40 different names for fees and charges across the market.
The consumer group warned last year that home owners "could be paying over the odds" for their mortgage because of the complex range of fees and charges preventing them from finding the best deal.
The CML and Which? were asked by Chancellor George Osborne to work together on the new tariff.
The tariff has standard terminology, meaning that lenders will use the same names for fees. It will also have a common format, so that each lender will list fees in the same order, with the same descriptions. This should help borrowers to find the best deals for them.
Lenders representing 85% of the market have agreed to introducing the tariff and putting it on their website by the end of the year so that it can be easily seen by consumers when they are shopping around, and more lenders are expected to come on board.
The tariff lists the names of charges and describes what they are for as well as saying how much the charge is.
It includes fees such as application fees, legal fees, product fees and valuation fees.
The CML and Which? are also working together to make it easier for people to compare the total costs of different mortgage deals over different deal periods. They plan to agree on how this should be done early next year, so that lenders can also put this into action in 2016.
Which? previously found that lenders often used different names for similar types of fee. F or example an application fee, which is a charge for assessing and processing an application, could also go under the name of a booking fee or a reservation fee.
It also found a wide variation between lenders in the cost of the same fees, which it said suggested that fees did not always reflect the true cost incurred by the lender.
Which? executive director Richard Lloyd said: "W e'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 said: "Lenders have successfully pulled together to put in place some sensible measures to help consumer understanding.
"We very much hope that the new tariff and standard terminology will make it demonstrably easier to understand and compare mortgage costs. Working jointly with Which? has been invaluable."