Consumers 'conned' by mortgage lenders
06 May 2004
A study has claimed that mortgage lenders are using "underhand" tactics to persuade unsuspecting customers to pay more than necessary for home loans.
According to a study by Which? Magazine, seven of the UK's top 20 lenders charged interest on an annual basis rather than daily or monthly on some mortgages, with one bank charging annual interest on all its products.
Which? editor Malcolm Coles said: "There is no excuse for the mortgage lenders still to be trapping people in these underhand ways.
"When we contacted those who charge interest until the end of the month, none of them offered much justification. This isn't good enough."
Charging interest annually results in borrowers paying interest on money they no longer owe, until the debt is recalculated at the end of the year.
On a £100,000, 25-year repayment mortgage, with interest charged at five per cent, a borrower would pay almost £90 a year more than if interest was charged on a daily basis, Which? said.
And borrowers who paid their loans off early were still charged interest until the end of the month by six of the lenders, the group said.