Fees and charges: savvy not sneaky


December 15, 2014

Godfrey Blight is director at Capita Mortgage Services

Most people see choice as a good thing: you get a choice on which supermarket to shop in, where to go on holiday, what to wear in the morning. You decide.

But when it comes to getting a mortgage consumer organisation Which? claims it isn’t always so easy to make a decision, with scores of products available, meaning that customers are getting caught out by ‘sneaky’ and ‘unclear’ fees and charges.

It says borrowers face more than 40 different fees and charges, making it hard to calculate actual costs over the lifetime of a mortgage.

Borrowers may have to do their homework before signing on the dotted line, as should anyone entering into a financial contract, but to say charges are hidden from customers – key to the argument Which? makes – is simply not true. In our heavily regulated industry, the costs of mortgage charges and administration fees are already available to consumers, so there’s no need to disclose ‘sneaky’ fees as there’s no case to answer.

The truth of the matter is that arrangement fees subsidise mortgage rates and go into the margin mix for the lender. This means the borrower gets a good rate in return and, with many lenders no longer insisting on extended redemption penalties, the customer gets to walk away at the end of the fix or discounted period. And let’s not forget, higher fees are more commonly attached to mortgages with lower rates that tend to be longer, less risky and at a fixed rate. Without arrangement fees, we could be looking at potentially higher costs overall and almost certainly a longer period of redemption penalties.

Providers must keep understanding their customers and the market. Offering more products to match customers, with real flexibility and low rates attracts – and keeps – borrowers who are looking for good deals.

We all want healthy competition in the mortgage sector and providers must continue to do all they can to make their offers simple and easy to understand.

Note to self: always read the small print. 

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