Ray Boulger, senior technical manager at John Charcol, said some lenders, particularly those that offer 100 per cent mortgages, are calculating their HLCs in a very unfair way.
He explained these lenders will tend to have no HLC up to 90 per cent LTV then charge between 90.01 and 95 per cent, but to make their 100 per cent mortgages more competitive they will then drop the charge between 95 and 100 per cent.
Boulger, who cited Leeds and Coventry building societies, Bristol & West and Accord Mortgages as some of the offending lenders, said calculating HLCs this way is as bizarre as the Chancellor’s method of calculating land tax and stamp duty.
He said: “Having no HLCs between 95 and 100 per cent LTV is good but it just highlights that having a HLC below this is bizarre. It is time that some lenders re-evaluated and made the charges fairer. Most of these lenders have got some special deals that are free of HLCs at 95 per cent but there is still some way to go.”
“The new 100 per cent deals have been designed sensibly. If they have HLCs then maybe clients would be less likely to take them up but lenders haven’t looked at their strategies concerning loans between 90 to 95 per cent LTV,” he added.
Colin Franklin, head of sales at Coventry Building Society, said: “I do understand what Boulger is saying. If you look at our portfolio at the moment, he’s absolutely right. But ours is a different story to other lenders doing this. Our 100 per cent mortgages are exclusively for first-time buyers so we want to help them. If we had 100 per cent mortgages for your ‘normal’ buyer, we would charge a HLC.”
