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Mortgage lenders accused of charging unnecessarily

Wed, 28 Sep 2005

Over 800,000 mortgage holders have been charged almost £1 billion in unnecessary higher lending charges (HLCs), Nationwide has claimed.

The charge is applied by banks to compensate for the increased risk of high loan to value mortgages, where the customer pays a deposit of 25 per cent or less on the value of their new home .

HLCs are charged as a percentage of the difference between the loan and the value of the home . Consumer magazine Which? claims that this can be as high as 10.5 per cent.

Stewart Bernau, executive director of Nationwide, said: "Despite the negative publicity around higher lending fees, it is clear that many borrowers continue to find themselves faced with this charge at a time when their finances are already stretched and they are at their most vulnerable."

Mr Bernau warned that major mortgage lenders risk being accused of "blatantly profiteering" by charging both a higher lending charge and higher mortgage rates for those needing to borrow more than 90 per cent loan to value .

Nationwide has abolished these charges.

The announcement comes as the Financial Services Authority yesterday called an investigation into the rise in mortgage administration fees.

Alliance and Leciester has increased its fees from £100 to £295, whilst Nationwide has introduced an administration fee of £90 where one had not existed before.

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