Specialist mortgage lender Accord – part of the Yorkshire Building Society – claimed to launch its "cheapest product of the year" this week. On the face of it, the 2.99 per cent two-year fix looks reasonable.
But, as I often warn on these pages, it's essential to check the charges, not just the headline interest rate on a mortgage. Accord's booking fee? It's just £95, which looks very good compared to the charges made by many other lenders.
However, there's more. Accord also charges a completion fee, whatever that is. And it's a hugely expensive £1,900. In other words, the charges for taking out the mortgage are almost £2,000. When rival lender first direct can charge just £99 for arranging a mortgage, there is no justification for Accord charging more than 20 times as much.
Offering a seemingly low-rate loan and then whacking people with outrageous charges is an unpleasant marketing tactic that I thought was in decline. So I'm saddened to have to report Accord's move and even more saddened that it's come from a mutual building society, which is supposed to work on behalf of its members.
We need to stop lenders getting away with these cheap tricks which are purely designed to sucker unsuspecting borrowers into paying more than they need for their loan. It's time for the City watchdog to put a cap on mortgage charges and make them totally transparent.
sCAREMONGERING about high interest rates hit the papers this week. Think-tank Policy Exchange warned that interest rates could climb as high as 8 per cent in the next two years, a level not seen since the recession of the early 1990s. Policy Exchange's chief economist, Andrew Lilico, predicted a double-dip recession caused by the Coalition Government's public spending cuts, followed by a boom, which would lead to rampaging inflation.
If the prediction comes true, it would leave people on tracker mortgages facing massively higher monthly loan repayments. In fact, the average borrower could face a £900 increase in repayments, bearing in mind that lenders would increase rates to above 8 per cent. With some current trackers at 4 per cent or more above base rate, it could leave borrowers paying 12 per cent interest on their loan.
Meanwhile, those who chose to fix their mortgages would be laughing, sitting on comfortably affordable rates, at less than half or even a third of those charged on tracker loans. Does that mean you should rush to fix your mortgage now while you can? No. The report was, as I said earlier on, scaremongering. While it could happen, it's unlikely.
What it does point to is the uncertainty we face in the future. the general feeling now seems to be that rates could start to rise this autumn. But the Bank of England is unlikely to rush to return rates to their pre-credit crunch levels of 4-5 per cent any time soon. It knows that a sudden rise in rates would leave hundreds of thousands of homeowners in trouble.
But with a rise in the offing, saving a little extra now will ease the transition to higher rates. It will also help build up a little nest egg that could prove very useful in the future.
Retirement planning does not often make for fun conversation, so it's hardly surprising that lots of couples don't talk to each other about it, according to the Prudential. The insurer's research shows that nearly a third of couples don't know or understand the details of their partner's retirement savings, while more than a fifth have never talked to their partner about financial planning for retirement.
While the figures are understandable, they could prove costly for anyone who doesn't soon talk about their financial future. As the Pru's Andy Brown says: "It is incredible that so many people do not know the details of their partner's retirement savings. This could mean millions of UK adults are banking on hope as their core retirement strategy."
In Charles Dickens' book David Copperfield, the character Wilkins Micawber effectively banks on hope, relying always on something "turning up". It never does of course and Micawber ends up in debtors' prison. That won't happen to couples who don't plan properly for their retirement, but they are risking a poverty-stricken old age by not talking through – and understanding – their options.
Things to discuss include include pensions and how much to save, when to retire, making a will, as well as housing options and agreeing on long-term care. They may be difficult things to discuss, but they are important. Get help from an independent financial adviser if necessary, but don't keep putting off making decisions about your later years.
Cheap banking?
Gimmick-led new bank Metro opens its second branch next Friday at London's Earls Court. New customers are promised free breakfasts, smoothies and popcorn, with a warm welcome for dogs. What about the bank's accounts? They're uncompetitive – presumably because the bank has spent all its money on promotion.
s.read@independent.co.uk
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