CML defends fees in response to Watchdog programme
The Council of Mortgage Lenders has argued that consumers need to recognise the difference between mortgage arrangement fees and charges relating to administrative costs to make an informed decision.
This statement has been made in response to tonight’s BBC Watchdog programme which examines how “banks and building societies are squeezing homebuyers with huge mortgage arrangement fees”.
The CML said that consumers need to look at any fees that form a core part of the pricing of the individual mortgage product on offer.
In its News & Views newsletter, the CML warned that product fees are sometimes calibrated against the interest rate payable, meaning lenders may offer a variety of different mortgages, some of which combine a higher rate with a lower fee, with others that have a lower rate and higher fee.
The benefit of offering some mortgages with fees and some without, and with fees at different levels, is that different customers can choose the combination that best suits their needs and preferences, the CML said.
It also highlighted that various regulations exist to protect consumers, and ensure that they can compare different mortgages on price, even if their fees and charges differ.
One of these is the APR, which takes account of not just the mortgage rate, but also any compulsory fees and charges associated with the mortgage, and must be clearly stated on advertising. The lower the APR, the lower the total cost of credit.
The other - “and a very important document to the mortgage customer” - is the key facts illustration, which is a personalised illustration spelling out all the costs and characteristics of a particular mortgage that a customer plans to apply for, before they submit a formal application.
The CML said: “As long as lenders comply with these rules that make all the costs transparent, consumers benefit. They get a choice of different mortgages, and can decide what combination of rate and fee they prefer. They get a highly detailed description of all the costs and characteristics of the mortgage they plan to apply for before they are committed to it.”