Lenders push borrowers into costly fixed rate deals
December 3, 2009 by admin
Filed under News, News-Mortgages
It has been claimed that some lenders have been trying to push their borrowers into costly fixed rate deals at a time when the base rate has been at an all time low of just 0.5 percent for the last eight months.
With many people due to come off fixed rate deals taken two or three years ago some lenders are trying to get them to go back onto more costly deals rather than switch to the standard variable rate, which with the current low base rate may be the most affordable option for many.
It has been further claimed that lenders are trying to encourage borrowers to come off the cheaper SVR and move onto a more expensive fixed rate deal, even though the base rate has been at its record low for eight month and is expected to remain there for at least another few months given the state of the economy. Some lenders are allegedly failing to tell consumers that when they come off their existing more expensive deal they can revert to the more affordable SVR.
One industry expert said: “Lenders appear to be encouraging borrowers on their cheap SVRs to switch to fixes; it is far from clear that this is the best advice.
Borrowers may find that they are buying themselves security when there is little need to do so. When they come to the end of the deal, interest rates may be rising, and they will find themselves on a variable rate looking for another fix, which will inevitably be priced higher.”
Many are concerned as to why lenders are not explaining to borrowers why it would make sense to move to the SVR in the current climate, and officials from the Financial Ombudsman Service stated: “We expect lenders to fully explain why it would be a good idea to get borrowers to pay a fee to switch deals. It is not enough simply to say ‘we don’t give advice’. If a customer feels that he or she is getting advice and it was not made clear that it was not advice, we will investigate.”
Tags: Mortgages, base rate, fixed rate mortgages, financial, would make sense, move, low base rate
