In the past, many homeowners have found mortgage charges and tariffs difficult to understand. That looks set to change though, as the Council of Mortgage Lenders (CML) and Which? have just released a new standardised format for mortgage charges.
The new tariff has already been tested on current Which? customers. This has allowed the tariff to be put to the test prior to being rolled out to the general public. Chancellor George Osborne had previously asked the CML to work alongside Which? to ensure the new tariff was understandable and better than the old ways of doing things.
Over 40 names for the same things
One of the most eye-opening facts to come to light in relation to the new tariff was that the fees and charges in place across the mortgage market came under more than 40 assorted names. Very often several names were used for the same thing, depending on which banks and building societies you were looking at. This led to confusion among customers, who very often could have been looking at an identical charge under two different names from two different providers.
85% of lenders are already going to introduce it by the end of 2015
The good news is the tariff has already been taken on by the vast majority of the UK market. UK mortgages will be described in the same terms by 85% of lenders by the time this year is over.
The tariff will appear in an identical format on the websites of those lenders that are bringing it into use. A single, agreed-upon terminology will be used throughout, and the terms will appear in the same places as well. As such it will be much like the calorie and content information that appears on food packaging. Every manufacturer uses the same information and format, so consumers can easily choose between different products. The same will now be true of people looking for mortgages offered by banks and building societies as well.
Success for the original Which? campaign
Which? was originally behind a campaign that highlighted how confusing mortgages and their associated costs could be to understand. It would be quite common to have one charge referred to by two completely different terms by two providers. Thus, someone looking for a mortgage could be unaware that the charges referred to the same thing. This in turn made it even more difficult to compare various mortgage products to determine which ones would be the cheapest in the long run.
The press release announcing the launch of the new tariff pointed out the two key areas worth looking at – the standard terminology and the common format. It is hoped that by streamlining these two areas it will become much easier for people to compare the various deals that are on the market today. This could lead to significant savings for many people as they will find it easier to locate the best deals.