The online mortgage company believes the changing face of the former “default option” for mortgage customers is adding to the confusion in the market as it struggles to return to normality.
Leading lenders including Abbey, Alliance & Leicester, Halifax, Lloyds TSB’s Cheltenham & Gloucester, Royal Bank of Scotland and Yorkshire presently don’t advertise standard variable rates to new applicants.
And that is particularly galling for new customers as the rates go as low as five per cent from Halifax and Lloyds TSB and 5.19 per cent at Royal Bank of Scotland which is comparable to the better flexible deals in the market.
Rates on SVRs currently vary massively with as much as 2.24 per cent separating the best and worst although the firms charging 7.24 per cent such as Chelsea Building Society have yet to respond to the Bank of England rate cut.
However the situation on SVRs becomes even more confusing – around 40 per cent of lenders charge an arrangement fee for SVRs while 88 per cent of lenders charge early redemption fees. The average arrangement fee is £213.80 while redemption charges around £155 are to be expected at those firms which charge.
The huge range in rates, the closure to new business and the introduction of fees on what was the default option shows the mortgage market is still a long way from returning to normal, mform.co.uk believes.
Francis Ghiloni, Marketing and Business Development Director at mform.co.uk, said: “The lowest standard variable rate deals are currently among the better deals on offer with rates as low as five per cent so it is disappointing that new borrowers cannot apply.
“In the past they were the default for borrowers who could not or would not search out better deals and they were attractive purely because of their flexibility which included not charging fees.
“Now there are exit fees and application fees it is even more important that customers assess the true cost of the mortgage. Lenders should be more transparent with their pricing policies and not charge exit fees on SVRs. Instead we are seeing signs of new stealth charges being loaded such as deferred arrangement fees which is a trend we very much oppose”
