Mortgage lenders are not always making their best rates available to new customers, according to new market analysis from mortgage website mform.co.uk.
Many new borrowers are being left out in the cold without access to lenders' standard variable rates which have come down, in some cases significantly, with the Bank of England base rate, denying them the full 1.5 per cent rate cut.
Those homebuyers looking for a new mortgage
deal will find that some lenders, such as Abbey, Alliance & Leicester, Halifax and Lloyds TSB, are not advertising their SVR deals to new applicants.
As the mortgage market struggles to return to normality amongst a looming recession and difficult lending conditions, mform.co.uk believes that "the changing face of the former 'default option' for mortgage customers is adding to the confusion in the market".
"The lowest standard variable rate mortgage
deals are currently among the better deals on offer with rates as low as five per cent so it is disappointing that new borrowers cannot apply." said Francis Ghiloni, marketing and business development director at mform.co.uk.
Several of the major providers' standard variable rates have now plunged to five per cent, such as those available from Halifax
and Lloyds TSB
, while others are offering competitive rates, such as the 5.19 per cent available from the Royal Bank of Scotland.
With some lenders not yet reflecting the cut in the Bank of England base rate to three per cent, there is a 2.24 per cent disparity between the two cheapest and most expensive ends of the mortgage scale.
The different fees that mortgage lenders
charge also make it difficult for mortgage customers to discern which is the best deal for them, with about 40 per cent of lenders charging arrangement fees at an average of £213.80, and 88 per cent charging an average £155 early redemption fee – a difficult choice for first time buyers.
These factors – the range in rates, denying new borrowers the best deals and introducing fees on SVRs – shows that the mortgage market is far from returning to normal, mform.co.uk says.
Ms Ghiloni continued to say that in the past, as the default option for borrowers who could not or would not search out better deals, lenders' SVRs were "attractive purely because of their flexibility which included not charging fees.
"Now there are exit fees and application fees it is even more important that customers assess the true cost of the mortgage.
"Lenders should be more transparent with their pricing policies and not charge exit fees on SVRs. Instead we are seeing signs of new stealth charges being loaded such as deferred arrangement fees which is a trend we very much oppose."
There are still some competitive deals for first time buyers – Compare first time buyer mortgage
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