New mortgage tariff aims to ease consumer confusion

Ruth Davies 23 November 2015

It's good news for borrowers this week; a new mortgage tariff is to be introduced, which should help consumers to find the right deal.

Whether you're a first-time buyer or a homeowner looking for a better deal, remortgaging can be a complicated business.

Part of the problem is that lenders aren't consistent in the way they advertise their fees and charges, which can make it difficult for borrowers to compare deals accurately. New measures announced this week hope to change this.

Following a campaign on the issue by the consumer group Which?, chancellor George Osborne asked Which? and the Council of Mortgage Lenders (CML) to work together on a solution. They have come up with a new standardised mortgage tariff, which includes:

  • Standard terminology: so lenders will use the same names for the charges and fees that apply to mortgages
  • Standard format: so lenders will list fees in the same order, with the same descriptions

This is a welcome change; Which? said there are currently 40 different names in use for fees and charges, often for the same service. For example, the application fee (charged for the processing of an application) is sometimes called a booking fee or reservation fee.

It's easy to see how this can confuse the issue when borrowers are trying to compare two different deals. The new tariff has been tested on consumers, with results showing that people found it easier to understand and compare costs than they did with the existing versions.

The CML says that lenders representing 85% of the market have signed up to the new tariff, agreeing to implement it on their website by the end of the year. CML director general Paul Smee said:

"Lenders have successfully pulled together to put in place some sensible measures to help consumer understanding. We very much hope that the new tariff and standard terminology will make it demonstrably easier to understand and compare mortgage costs."

How to find the best deal

This change is a good step in the right direction for the mortgage market, but there's more to finding the right mortgage deal:

  • Understand the impact of fees: the current climate of very low rates means that some lenders are increasing their fees. When looking at any deal, you need to factor fees into the total cost – instead of simply going after the lowest rate available.
  • Take introductory periods into account: as Katie explained in detail in this article, the APR on a mortgage isn't always the best indication of how much it will cost you. This is because the APR assumes that you'll stay with the deal for the length of the term. In reality, if you were to take out a two year fix, you'd be looking to switch after two years. You need to calculate the true cost over this period instead.

For more guides and information to help you find the best deal, visit our mortgages section.

Our mortgage tables allow you to compare deals from across the market, filtering for the features that matter to you.