Homeowners could be finding themselves under increased financial pressure, it has been suggested.
The warning comes as research released by mform reveals that that a number of lenders are advertising mortgage deals but are failing to make consumers aware of the full cost as they do not include all applicable fees. Consequently, companies will be able to highlight a lower rate of interest for the mortgage product, before lending more money to prospective borrowers to help them meet the cost of various charges to their mortgage, often at a higher rate of interest, the firm argues.
This in turn, the financial services firm states, could see those applying to borrow 150,000 pounds also burdened with arrangement fees of 1,000 pounds. Effectively increasing the total value of the loan to 151,000 pounds, consumers could well see themselves struggling even more with their ability to service demands on their finances such utility bills, personal loans and mortgage repayments.
The company pointed out that those borrowing 175,000 pounds with Yorkshire Building Society under its 5.59 per cent five-year fixed-rate offer would be set to pay 1,048 pounds 08p per month for the initial term of the contract. However, with the financial services provider charging fees of 3,820 pounds, those who choose to add such costs to their mortgage could see their payments rise by 59 pounds 85p per month - some 1,508 pounds over the course of five years - which could well affect their ability to make repayments as utility bills, additional loans they have may taken out and other constraints on their day-to-day finances.
Meanwhile, those borrowers who find that upfront fees are added to the two-year 5.89 per cent fixed-rate deal they have taken out with Egg could see costs of 899 pounds added to the cost of their long-term mortgage.
Francis Ghiloni, marketing and business development director for mform, said: "No one would normally opt to borrow 899 pounds over 20 or 25 years but that is what you are effectively doing if you decide to add the fee to the loan. Of course for many of us finances are stretched when moving house or remortgaging and so it can be tempting to just add fees to the loan in order to save some cash. Where possible the advice should be to pay the fee upfront as that will prove to be a better deal in the long-term. Of course if lenders didn't load mortgages with confusing fees and were more upfront about the true cost of a loan the problem wouldn't arise in the first place."
Earlier this year, it was suggested that a number of consumers could see themselves developing debt difficulties as figures released by moneysupermarket revealed that six per cent of mortgage consumers do not know how much interest they are paying on their borrowing. Head of mortgages Louise Cumings stated that the study indicated that Britons are lacking in "universal awareness" when it comes to reviewing their financial situation. The moneysupermarket representative purported that consumers should regularly examine their mortgage repayments as it is "frequently the highest single monthly household expenditure". As a result of failing to do so, consumers could find their ability to service various areas of their finances squeezed. Consequently, a cheap personal loan could be one way for consumers to help cope with unexpected financial difficulties.
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