In a recent early day motion, a group of MPs accused lenders of taking advantage of consumers by charging high arrangement fees on low rate products. They expressed concern that “poorly advised home buyers” could be attracted by such low headline rates even though they might not be good value for money.
The motion stated: “High arrangement fees are being used to subsidise low headline interest rates so as to ensure that mortgage products appear in best buy tables, even where such mortgages are not the best buys once account is taken of the fees charged.”
It called on the financial services industry to ensure that the headline rates and any additional fees of mortgage deals are given equal prominence, ensuring that home buyers are not sold inappropriate products.
But the CML has leapt to the defence of such schemes. In its latest newsletter it reveals that it plans to contact the MPs concerned and explain that high fee, low rate products are legitimate.
A spokesman for the trade body says: “There is nothing inherently wrong with low rate, high fee products which may be the right and rational choice for people borrowing large sums of money. The key is to have in place compliant selling practices under the Financial Services Authority regime.”
He adds: “We would not support constraints on product design or price controls.”
The motion also condemned Halifax’s 1,999 arrangement fee as a particular concern. But a spokesman at Halifax defended the fee, describing it as an “upfront and transparent” feature of the product concerned.