Lib Dems claim some people tricked into taking out mortgages with high fees
According to the claims of a couple of Lib Dem MPs some people in the UK are being tricked into taking out mortgage deals from lenders that charge extortionate arrangement fees.
The MPs state that very often some of these mortgages are placed towards the top of the best buy tables for mortgages because they offer low interest rates on an introductory basis. However, when consumers then go for these deals they find themselves being hit by huge arrangement fees, counteracting any reduction in interest rate.
The MPs used a deal by the Halifax as an example, stating that although the banks offered a seemingly tempting introductory period of one year at just 1.99 percent, they also demanded around two thousand pounds up front for the privilege of taking out this deal.
The claims of trickery amongst lenders in this way has been denied by the Council of Mortgage Lenders.
One CML spokesperson stated : "Deals with high arrangement fees may not suit everyone, but those borrowing large sums could find that a high fee is more than offset by the savings they make in interest payments."
The two MPs that claim consumers are often being tricked into thinking these mortgages are great deals are Lib Dem’s Vince Cable and Steve Webb.
Mr Webb said: "Many consumers may be drawn to an advert by a low headline interest rate, but not fully appreciate that once account is taken of the astronomical arrangement fee, the product may not be good value for money. Lenders are clearly setting out to trick people."
However, in relation to its advertisement one Halifax official responded by saying: "All of the rates relevant to this product are given exactly the same prominence in our advertisement. It is extremely unlikely - almost impossible - that any customer could make a mistake about either the initial rate or the 'go to rate' or the APR."
Tom Smith
5th April 2007
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