Which? research published last month revealed that borrowers are not being given clear enough information and lenders are charging a vast array of different fees, which makes it difficult for people to find the best mortgage deal.
The research found that the information consumers are typically shown when comparing mortgage deals, including mortgage APR, is inadequate and potentially confusing. Just 3% of people we tested were able to correctly rank five two-year fixed-rate mortgage deals in price order.
CML also found that people buying a house are faced with over 40 fees and charges from lenders, from set-up costs to arrears fees.
The project will come up with proposals on:
- transparency and presentation of fees and charges to help improve consumer outcomes;
- standardisation of terminology around fees and charges;
- consumer education;
- setting administrative charges so that they reflect the cost to the lender.
The project is expected to last up to six months and will produce guidance to be taken forward by the mortgage industry on how to make things clearer for consumers. There will also be an update on progress at the 2015 Budget.
Which? executive director Richard Lloyd said:
"This is good news for the thousands of consumers who supported our call for the chancellor to end confusion about the full cost of taking out a mortgage.
"With so many people on tight budgets trying to get a foot on the housing ladder or looking to remortgage as rates rise, it's essential that they can more easily find the best deal.
"We look forward to working with the Council of Mortgage Lenders to simplify the wide range of complicated fees and charges in the market so that borrowers don't pay over the odds on their loan."
CML director general Paul Smee said:
“With the largest and most competitive mortgage market in Europe, UK customers are well-served for choice.
“We recognise that for this choice to bring the greatest benefit, consumers need to be able to understand and compare products confidently. We welcome the opportunity to work with Which? towards measures that can make this easier for them.”
