The move by the Council of Mortgage Lenders and Which? to simplify home loan fees with a new tariff of charges was well intentioned and has undoubtedly delivered benefits to consumers, but it has surely missed a trick by failing to tackle the issue of valuation charges.
These charges vary dramatically between lenders and are one of the major upfront costs when customers take out a mortgage. Worse still, this variation may give consumers the impression they are getting something akin to a survey, when in fact the valuation fee they are paying is purely for the lender’s benefit. The average cost of paying the valuer is £200 to £250, while lenders add on anything between £0 and £100 for themselves.
It is time to bring an end to the practice, still prevalent across the financial services industry, of shoehorning in an extra slice of profit margin at every opportunity. After all, the charge added on by some lenders is money that homebuyers could be putting towards getting their own survey done, giving them greater peace of mind and also indirectly reducing risks for the lender of a borrower being stuck with a problem property.
Lenders can charge whatever they like as an application fee and most customers accept that the total fee needs to be balanced against the interest rate to understand the true cost of a mortgage. What feels unfair is the habit of tacking on an extra £50-£100 here and there in the hope that customers won’t tally up the total.
The CML claims it is unable to tackle this issue of “cost reflectivity” in relation to valuation fees, which is not the clearest choice of language considering the debate is one about transparency of costs.
The words ‘clear’, ‘mud’, ‘spade’ and ‘spade’ spring to mind. Let’s hope Which? takes up the issue – as was said in its tariff of charges work – and pushes lenders to go further in clarifying the true upfront costs of valuations for consumers.