Lenders charging extortionate fees for lower interest mortgages

According to a recent report a number of banks and building societies are now offering a wide choice of mortgage product for consumers to select from when purchasing a property or remortgaging – but on many of these products consumers are having to pay extortionate administrative fees in order to enjoy a more competitive interest rate.

According to some experts, lenders are pushing down interest rates on some mortgage loan deals to make them look more attractive to the consumers, but are recouping some of that money by charging extortionately high fees for arrangement of the product.

The fees that are charged on some mortgage products can go by one of a range of names, but are basically described as administrative fees. However, the actual cost of administering the mortgage loan product for the consumer is way lower than the fees that are being charged by the banks and building societies.

Many consumers see the lower interest rate attached to the mortgage and immediately assume that they are onto a good thing, not taking into account the high price that they will have to pay in order to get that particular mortgage deal.

David Hollingworth works at London and County brokers, and he stated: 'Lenders are using these products fees for administration and reservation of the mortgages as another income stream to enable them to push down their rates. It does make the market less transparent for the ordinary consumer.'

However, an official from Northern Rock said that consumers did not have to pay fees, but its choice of products meant that consumers could decide whether paying no fee was a priority or whether a lower interest rate was preferable.

He stated: 'What we are doing is giving consumers a complete choice - for those who want low monthly repayments or those who do not want fees. We do not call these charges administration fees - they are product fees.'

Tom Smith
05.03.07

 

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External Links:

• Council of Mortgage Lenders