T he attention of the public has been caught by a near doubling of mortgage fees over the last few years. The number of mortgage clients disputing the fees they have to pay on deals has more than doubled in 2007 to become the largest complaint among consumers, according to the Vertex Financial Services annual benchmarking study.
The review, developed in consultation with the Council of Mortgage Lenders (CML), found that while overall client complaints had reduced slightly from 2006, over-charging complaints had tripled.
Research from financial information group Moneyfacts backed up the Vertex report. It stated fees charged to arrange mortgages have nearly doubled in just two years with the average mortgage arrangement fee rising from £441 in 2005 to £827.
Data released earlier this year from the Financial Ombudsman Service (FOS) revealed an 11% increase in complaints about the mortgage industry from 2006. Most complaints surrounded the fairness of exit charges, mortgage arrears administration charges and fees charged by brokers for arranging mortgages.
Commenting on the figures, David Edwards, managing director of Mortgages at Vertex, says technology and outsourcing options could help decrease complaints to provide more positive statistics next year. He says: “We are trying to get more advisers to use technology. We feel technology can provide correct data and information in one place with a managed workflow leading to increased compliance. As better technology and outsourcing options are also now available, there is certainly a good chance that we will start to see a much more positive picture emerge.”
He adds: “Next year, lenders may have higher arrears, repossessions and debt collection problems so it is vital professional systems are adopted to ensure that debt is correctly managed, scored and collected to the benefit of all.”
Edwards argues technology can provide correct data and information in one place with a managed workflow leading to increased compliance. He says: “Technology alone is not enough but if information is centralised and data is accessed wherever and whenever advisers want it, it can help people work more effectively. This will minimise costs and mistakes which may reduce complaints.”
Pressure on profits
Stephen Johnson, director of Commercial First, says increased fees were symptoms of lenders being under too much pressure. He comments: “Lenders want to keep costs down but we want to get yield on our loans. Funding issues and deals being pulled are the main problem for lenders at the moment.”
James Cotton, mortgage strategist at L&C, says the increased fees mean that borrowers need to look more carefully at deals. He adds: “It is more important than ever for borrowers to focus on mortgage deals. Many still focus their attention on getting the best rate without looking at the true cost of the deal.” He believes brokers are ideally placed to tell clients which deals could be pulled and which deal is best for them. However, if lenders reduce underlying costs by passing them onto the consumer, people are correct to complain, he says.
He adds: “The high fees make it difficult for borrowers to find the best mortgage deal and brokers can earn their money by guiding customers through the pitfalls of the deals.”
Mark Lofthouse, chief executive of Mortgage Brain, agrees advisers can help borrowers by looking carefully at mortgage deals and walk clients through any potential deals. He believes technology can speed up the mortgage process, particularly if fast-tracking is used, although this has unearthed its own controversies, as has been seen in the self-certification versus fast-track debate (29/10/07, p8).
However, the reasons for people making complaints about fees may be quite sinister, and there may be little technology can do to hinder this. Ian Giles, director of marketing at Kensington, said customer watchdog sites are encouraging people to complain.
He said: “While it is true that lenders need to be transparent and ensure customers know exactly what they are paying for in order to bring down complaints, consumers are being given wrong information. They find consumer organisations which tell them to complain and give them templates to do so. When customers see a deal with a high arrangement fee, they feel it is ridiculous but they are not always looking at the full deal. It is not always the best ground for disputes.”
He added technology can provide the broker with more choice but they must work side by side to help consumers. “If people are complaining about speed, technology will help but technology will never replace the broker. Technology is not always great at telling people there are problems and for picking out the best deal and people do want the human touch. For instance, we find consumers will find the best product and will then call a lender or broker to check whether it is best for them. Quite often, it is not the best for them because people have put the wrong information into boxes or something has gone wrong in the process.”
Most lenders are convinced of the need for technology, but are also aware of its limitations. Technology will not decrease complaints by itself, but it can provide a better service to lenders, brokers and clients.
If, as the CML and Vertex have suggested, lenders have higher arrears, repossessions and debt collection problems in 2008, it will be interesting to see whether technology will bring down the level of complaints about charging. n