Most borrowers confused over true cost of mortgages
Only five of the 1,000 homeowners and homebuyers surveyed could correctly rank five two-year fixed-rate mortgages in order of total cost. Just a quarter could identify the cheapest and most expensive deals.
However, nearly half of those taking the test believed the question was easy.
Which executive director Richard Lloyd said: “While it’s good to see lenders now offering lower interest rates, mortgage arrangement fees have risen dramatically in the last two years making it increasingly important for borrowers to understand the overall cost. Our research shows that even people who already have a mortgage struggle to recognise the cheapest deal.
“Lenders should be more transparent about the true cost of mortgages so that borrowers can more easily compare deals and find the best one for them.”
Borrowers who have remortgaged were the most likely to spot the cheapest and most expensive deals, followed by those who had bought their home in the past five years and potential homebuyers.
Mortgage adviser Daniel Bailey said he would always try to show clients the total cost: “Clients see headline rates in the press but what they do not see is a £2,000 arrangement fee. When that is taken into account it may not really be the best deal.
“One of the reasons clients should see a broker is to look at the overall cost rather than rates.”