It reported that the number of lenders who charge HLCs has not changed significantly over the past year and questioned whether many were using the fees to generating extra income, at the consumer’s expense.
Julia Harris, analyst at moneyfacts.co.uk, said: “Being subjected to a HLC can be a very costly addition to the fees already associated with house buying, and can make the initial savings on a competitive rate vanish almost immediately. With either a rising or stable property market being the norm in the UK in recent years, it would be interesting to know how many claims have been made against what appears to be a somewhat outdated form of insurance. Is it just another mechanism for lenders to increase fee income?”
Harris also questioned the hypocrisy in allowing HLCs to be added to the loan, stating the fees, aimed at protecting the lender from providing a high loan-to-value, were adding further to consumer debt.
Nick Gardner, director at Chase de Vere Mortgage Management, agreed: “The regulator should ban the HLC. It can cost thousands of pounds and flies in the face of government policy which is trying to help first-time buyers. It is also grossly unfair, forcing borrowers to pay what is effectively an insurance premium that protects the lender but offers the borrower nothing in return. Also it is entirely optional, so the fact most lenders use it to boost their profits is outrageous.”
Paul Hunt, head of marketing at Platform, said it was reviewing its HLC policy and he could see the fees disappearing in future.
“In the specialist sector, the products are more niche and there’s an amount of added risk, so some lenders do charge HLCs. We do on some products because from a historical perspective, it’s prudent to do so but it is something we are reviewing. As the sector moves into the mainstream, I see a time when HLCs are not charged by the majority.”
