Mortgage lenders are bending the Best Buy tables by tinkering with arrangement and exit fees. How do you find the best home loan?
When you're looking around for a home loan, it's vital to look beyond those eye-catching headline rates of interest, because there's a lot more to a mortgage than meets the eye.
When most homeowners search for mortgages, their key measure of the relative attractiveness of home loans is their monthly repayments: the lower, the better. However, although capital and interest payments are indeed the biggest elements of a mortgage, you should still pay attention to other fees.
For example, you should check for administration, arrangement, application or booking fees; valuation or survey fees; mortgage indemnity premiums (also known as a higher lending charge); redemption penalties if you pay off the loan early; and exit, sealing and deeds fees.
Worryingly, these fees (particularly arrangement and exit fees) have soared in the past two years, as I warned in Your Mortgage Has A Nasty Sting. Mortgage lenders blame these increases on the higher cost of regulation under the Financial Services Authority (FSA). However, the FSA disagrees and, in June, it warned lenders that massively increasing exit fees could be unfair, so it asked them to justify these fee hikes. (A statement from the FSA is expected at the end of this month, so watch this space.)
Oddly, although the FSA is investigating exit fees for mortgages, two lenders (Britannia BS and Standard Life) have actually increased these fees since June, which is surely asking for trouble! Indeed, it can easily be argued that these fee hikes are unfair and unenforceable, as lenders cannot simply raise these fees willy-nilly without consulting borrowers. If they do, they risk breaching the Unfair Terms in Consumer Contracts legislation and the FSA's Treating Customers Fairly principle.
If you believe that the costs of paying off your mortgage have been unfairly increased to your disadvantage, I suggest complaining to the Financial Ombudsman Service (FOS). For example, I suspect that the FOS will look dimly on the 543% increase in exit fees at Lloyds TSB/ Cheltenham & Gloucester over the past ten years, or the 450% hike at Barclays/Woolwich! As it costs you nothing to complain to the FOS (although the financial firm involved has to pay a fee for each complaint), you have nothing to lose by making a complaint.
This issue has been brought to the fore by the launch of a 'no frills' home loan by ING, which has shaken up the savings market with its no-strings, high-interest savings account. ING Mortgages' home loan is far more transparent than most, as it doesn't charge exit fees or any other hidden charges. Thus, although its two-year fixed-rate deal may not be as low as other Best Buy rates, there are no nasty surprises lurking in the small print!
Lastly, if you find all of this a little too boring or complicated, then let someone else do the spadework for you. My advice is always this: with over eight thousand different home loans to choose from, it's almost impossible to find the best deal. Hence, smart cookies employ the services of a no-fee mortgage broker to do the searching and paperwork for them. I recommend giving the Motley Fool's Mortgage Service a try, which is run by award-winning, no-fee broker London & Country Mortgages. Alternatively, a free call to 0800 073 1953 will get the ball rolling today!
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