Mortgage advisers are being hit with a new TCF broadside after claims they may be unnecessarily recommending homebuyers add set-up fees to their mortgage instead of advising they pay them up front.
A study conducted by uSwitch.com suggests that, despite the added cost, 32% of consumers who added an arrangement fee onto their mortgage were advised to do so.
It says this is despite the fact a set-up fee paid in this way can add 112% on average to the cost of the original arrangement fee.
In addition, the uSwitch study suggests almost 900,000 consumers have had fees added to their mortgage without realising they had agreed to it.
Ann Robinson, director of consumer policy at uSwitch, says: “This is a real catch-22 for consumers who are struggling to find the funds to pay mortgage set-up costs.
“In fact, by allowing consumers to add fees onto the mortgage, it could be argued that providers are doing them a good turn. This is particularly true for first time buyers where it could mean the difference between getting on the property ladder or not.
“However, adding fees to a mortgage means that you will be spreading the amount over many years and paying interest for the pleasure of doing so - this is an extremely expensive option and should always be seen as a last resort.
“If you can in any way manage to pay the fee upfront this will always be your best option.
"Otherwise buyers should make sure that they make regular overpayments to minimise the impact of high interest costs - as they could end up doubling the original cost of an arrangement fee.”
020 7034 2636
Joined as head of strategy, multi asset, in June
Group income protection
Nine in 10 do not have income protection
Set to become part of Single Financial Guidance Body