Ben Thompson, director of Clear Cut Mortgages says:
“Although lenders’ claims are not deliberately misleading, they are certainly going to confuse homeowners. This could hinder the uptake of these kinds of products, which for the right person can represent exceptional value for money. In the worst circumstances, borrowers can end up with the wrong product for their circumstances.”
Examples of recent advertising include:
- Abbey National Flexi Plus Mortgage marketing states: “for example, with savings of £5,000 on a £65,000 mortgage, you could reduce your interest by £8,596 and pay off the loan over 3 years early”.
- IF’s marketing bases its assumptions on a case study with £95,000 borrowed and £5,000 in savings. The adverts continue: “he could reduce the total amount he'll pay on his mortgage by a staggering £10,733 and pay it off earlier”.
- NatWest One advertising claims: reduce your payments by £18,000 with the best bank for mortgages. The ad states that a borrower can save £18,318 and pay off the loan four years and four months early. This is based on borrowing of £112,500 on a property worth £145,000 over 25 years. The borrower is assumed to have “gross annual income of £30,000 and [to be] leaving £65 extra per month in the account”.
Ben Thompson comments:
“Because product advertising carries potential savings from offsetting based on different consumer savings levels, it is difficult to tell which products offer the best value.
“Different ways of expressing the savings – as totals over the course of the mortgage and/or as time taken off the mortgage term further complicates matters. The NatWest One account further complicates matters as it does not state an amount offset against borrowing – rather it states an annual income and estimates a nominal amount is left each month in the customer’s account which accumulates to be offset against borrowing.
“Consumers are left trying to compare apples with pears.”
This is confusing enough. However, as the table below shows, research amongst lenders can leave the issue of comparability no clearer. Even when presented with a “case study” borrower with fixed borrowing requirements and fixed savings, different lenders still express the potential savings in different ways."
