Progress on mortgage fee transparency measures
Standardised descriptions of mortgage fees to aid cost comparisons are to be adopted by the end of this year, the Council of Mortgage Lenders has claimed.
According to a three-page joint report to the chancellor from the CML and Which?, lenders are working to provide greater transparency to advisers and clients.
In a letter accompanying the report, which came out the same day as the Budget, the CML told the chancellor: “We have been working closely together over the last few months to identify what opportunities there are to help customers when they are trying to compare mortgages. A summary of this work and our resultant proposals accompanies this letter.”
The three-page document was an interim report – the final publication is expected later this year – which was first proposed in November 2014.
This followed the publication last year of a briefing on mortgage fees from Which?, which called for action to improve the ability of consumers to compare mortgage prices and to make the full cost of a mortgage clearer.
At the time, the CML and Which? agreed to form a working group to address these issues over a six-month period.
The letter added: “Our hope is that our proposals will both allow customers to have a better understanding of what is available in the mortgage market and ensure they will be able to make a more informed choice of what option they want to pursue.”
The next phase of this work will include consumer education, communication about these changes and looking at the value of charges.
Typical frustrations include situations where consumers find several different terms are used for the same thing – frequently the case with valuation and Chaps fees.
Both the Building Societies Association and the Association of Mortgage Intermedaries are to be kept abreast of developments, and findings will be discussed with price comparison websites.
| Key proposals |
● Introducing a common approach by lenders to make their ‘tariff’ of fees and charges available to customers to avoid confusion and make it easier to find information about mortgage costs; ● Wider use of consistent terms to describe the same type of fees and charges that currently have an array of different names; ● Better explanation of whether fees are compulsory or avoidable and when they will be charged; and ● Clearer ways of presenting information to help borrowers compare the cost of particular mortgage deals over specific periods, not just the upfront costs. Source: CML/Which |
Adviser view
David Hollingworth of Bath-based London & County Mortgages, said “Of course it is well-intentioned, but I don’t know how you will do it, practically. A lot of fees associated with mortgages are already standardised as part of regulation, such as early repayment charges.
“This, of course, is more about administration costs and the ability to compare like with like. However, as we have seen with the adoption of APRs, it is very difficult to do this, and there we also now have a European directive coming on that matter, which will complicate things further.”
