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Brits Still Paying the Price for Mortgage Clauses

Despite the introduction of regulation, expensive mortgage clauses are still costing Britons a packet.

It is now a year after the introduction of 'M' day, when the Financial Services Authority (FSA) took over the responsibility of regulating mortgage lending. However, despite this positive and bold step, hidden clauses and added extras in mortgage contracts are still seeing borrowers being hit with extra charges, charges they can ill afford.

M-day saw the death knell of adverts promoting low interest rates with the real costs of the mortgage hidden in the small print. The new regulation also saw Key Facts Illustrations (KFI's) become compulsory.

However, Nationwide, one of the UK's largest mortgage lenders, warned that there are still ways and means of getting customers to pay more than they should, including higher lending charges, the way interest is calculated, tied-in insurance policies, extended redemption penalties and by upping rates for existing customers.

Nationwide, which believes it is one of the lenders who avoid the use of such schemes to wring money out of its borrowers, has offered advice for those who are confronted by any of these ploys.

Higher lending charges, or mortgage insurance guarantees, cost around a staggering £1,500 and tend to hit borrowers looking to loan over 90 per cent of the value of their property. Last year around 50,000 people paid higher lending charges, according to the building society.

Nationwide executive director, Stuart Bernau, said: "If your lender wants to charge this fee, which protects the lender, not the borrower, look for a deal with another lender."

Lenders who levy higher lending charges often charge interest annually, not daily, seeing mortgage-holders paying interest on money that they have already paid back.

" Consumers would be better off choosing a lender with daily interest and a low interest rate. If borrowers are being charged annual interest instead of daily interest, they may not be getting the full benefit of their repayments and so should consider switching to another lender," Mr Bernau advised.

However, beware that these are not the only tactics employed by mortgage lenders to extract maximum monies from borrowers.

" Don't be fooled by an initial low interest rate that has extended redemption penalties," he added.

" Rarely, if ever, does the benefit received from the low initial rate outweigh the burden of the higher rate at the end of the period, so be careful.

" In addition to checking the fees detailed in the KFI, borrowers should also ask for full details of the range of fees charged by the lender. A recent tally across high street lenders identified a range of fees that lenders charge for mortgage application and servicing."

Other hidden mortgage charges some lenders apply include fees for altering the term of a mortgage, getting a duplicate mortgage statement, or for deeds storage.

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