Nationwide mortgage data sparks higher lending criticism

03 April 2006
Nearly a million borrowers are likely to pay higher lending charges (HLC) this year, according to new research that has led to criticism from a financial expert.

Data from Nationwide has revealed that 100,000 extra borrowers will pay nearly £2 billion in HLCs, bringing the total to around 900,000 by the end of 2006.

Going under a variety of titles, such as indemnity premium, insurance guarantee premium, additional security fee, the charges are there to protect the lender in case of default. Criticising this as a charge on first time buyers (FTBs), Rachel McKay, mortgage analyst at, said: "Times are trying enough for many first time buyers, those most frequently hit by higher lending charges, without being faced with another up front cost at a time when they can ill afford it."

Over 6,400 residential mortgages are available in the UK from 135 lenders which Ms McKay says can lead to a "minefield" for potential FTBs when making the right choice.

She said that some 70 per cent of lenders charge a loan to value ratio of anywhere between one per cent and 12 per cent which creates an HLC.

As this may apply to repayments over 25 years, even a £1,500 fee at 7.5 per cent would grow to £3,252 by the end of the term.

Some providers also apply their insurance terms to the whole of the loan amount rather than above a certain fee, something that Ms McKay calls "archaic" in the age of credit checking technology.

With the UK having enjoyed a stable economy for the past few years, Ms McKay criticised mortgage lenders for hitting borrowers with even more charges as many struggle to get onto the housing ladder.

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