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28 March 2006
Mortgage borrowers are wasting over £200 million a year on unnecessary higher lending charges, claims a building society.
Nearly 1,000 borrowers will be affected by the higher lending fees, which are charged by many high street lenders to customers borrowing more than 90 per cent, or sometimes 75 per cent, of the value of their property, says Nationwide.
The charge, which is on average around £2,000, covers the lender in case the borrower defaults on their loans, claims the company, and no direct benefit is received by the customer, other than being able to borrow a higher amount.
"Not only are higher lending charges unwelcome for homebuyers, they are also avoidable," said Nationwide executive director Stuart Bernau.
"Consumers need to be aware that the headline interest rate is not all they pay - they must also take into account the fees and charges that form part of their mortgage deal."
Nationwide has called for higher lending charges to be abolished, warning that it causes particular problems for first-time buyers who are struggling to fund a deposit and stamp duty as well as other legal costs.
Even though it can be added to the mortgage, over 25 years a higher lending charge of £2,000 could end up costing borrowers around £3,800, calculates the building society.
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