A study by consumer group Which? of 1,000 homeowners and homebuyers has found that 99.5 per cent of them were unable to work out the total cost of mortgage deals.
It asked interviewees to rank five two-year fixed-rate mortgages in order of total cost over the two years, including monthly repayment charges and arrangement fees, based on borrowing £100,000.
Only five people (0.5 per cent) correctly ranked all five mortgage deals in the correct order, and just a quarter (27 per cent) could identify the cheapest and most expensive deals despite half (49 per cent) saying they actually found the test easy.
Only three in ten (30 per cent) people who have remortgaged, and a quarter (25 per cent) of people who had bought their first home in the past five years, correctly ranked the cheapest and most expensive mortgages compared with one in five (22 per cent) potential homebuyers.
Which? did the test to demonstrate the spiralling cost of fees and emphasise that borrowers should not just be comparing mortgages by the headline rate alone.
Which? executive director Richard Lloyd, says: “While it’s good to see lenders now offering lower interest rates, mortgage arrangement fees have risen dramatically in the last two years making it increasingly important for borrowers to understand the overall cost. Our research shows that even people who already have a mortgage struggle to recognise the cheapest deal.
“Lenders should be more transparent about the true cost of mortgages so that borrowers can more easily compare deals and find the best one for them.”