Lenders hit back at Nationwide

Lenders have hit back at Nationwide after it accused them of making unnecessary lending charges.

Stuart Bernau, executive director at Nationwide, says Halifax and Abbey run the risk of being accused of blatantly profiteering by charging higher lending charges and higher rates for those needing to borrow more the 90% of the value of the property.

He says Halifax and Abbey charge a substantial higher lending fee on top of higher interest rates, which is effectively charging borrowers twice to offset the risk of higher LTV lending. This comes at a time when repossessions and arrears are at low levels.

But both Halifax and Abbey have hit back at these claims and justified the charges.

Joe Wiggins, spokesman for Abbey, says: “We normally impose a higher lending charge when a customer wants to borrow 90% or more of a property’s value because there is a greater risk to Abbey on high LTV loans. We choose to have a fee whereas Nationwide has no fee but charges higher LTV customers much higher rates, so it is certainly not whiter than white. Abbey customers do not have to pay the fee upfront so the cost can be spread over the term of the mortgage.”

Halifax says it is only a small proportion of borrowers that actually pay the higher lending charge and, like the Abbey, it recognises there is a greater risk involved.

And Paul Fincham, spokesman for Halifax, says: “The vast majority of first-time buyers these days put down a sizeable deposit because they realise they get a better deal that way. It is only about 20% that pay the higher lending charge.”

Nationwide estimates that since it abolished its higher lending charge back in September 2000, borrowers in this country have paid over 1bn in unnecessary higher lending charges.

Bernau, adds: “Despite the negative publicity surrounding higher lending fees it is clear many borrowers continue to find themselves faced with this charge at a time when their finances are already stretched and they are at their most vulnerable.

“An added cost of around 1,500 is the last thing they need.”