John Charcol comments on new Abbey 'no fee' mortgage range

New Abbey 'no fee' range misses out biggest fee of all: stamp duty not included

Katie Tucker, product specialist at John Charcol comments, "Abbey claims to pay all of the upfront fees with its new mortgage range, however what is omitted from the cover is the cost of stamp duty, which as homeowners know all too well is the main cost when moving house.

"For a property of £174,827 the stamp duty bill would be ?1,748 and in the case of properties above £250,000 it would be at least ?7,500, making the fees that Abbey covers less than 26% of the total moving costs.

"It's also a shame that Abbey doesn't offer to waive its £225 exit fee, or cover the one charged by the previous lender.

The most competitive mortgages of the new range are the two year fixed rate and the two year tracker rates, both of which have an 18 month overhanging tie-in.

The Early Repayment Charge would be paid at the end of the two years which means Abbey is effectively just switching the payment of the fee from the start of the mortgage to the end.

Many consumers will be put off by this extra complication." Research carried out by John Charcol shows that when comparing the total cost over two years of the Abbey two year fix (5.34%) and Alliance and Leicester's two yr fix of 4.99% with a ?999 arrangement fee, borrowers are still consistently better off taking the lower rate and simply instructing and paying for the legal work themselves.* Even in Abbey's own example of a purchase price of £174,827 the borrower would be?300worse off using Abbey'sproduct.

For a £250,000 loan amount this is as high as ?1,200.

Tucker continues, "Whilst the Abbey deal may appeal to those consumers looking for convenience and ease, it is unlikely that they will actually find this is the case in the long run.

Using cheap 'by the bulk' solicitors can work for remortgage cases, but for sales and purchases they are notoriously slow and impersonal.

"It will also be interesting to monitor how these mortgages will work in practice.

It relies on people selecting Abbey as their lender before they even put their house on the market, as at this stage you have to declare a solicitor.

As in many cases people will put their house on the market first and won't choose a lender until their purchase property is found, the Abbey range just may not be appropriate." Borrowers keen to see how much they could save on their mortgage repayments should either contact John Charcol on 0800 71 81 91 or post a copy of their existing mortgage offer marked clearly "Remortgage Check" to John Charcol, Holbrook House, 10-12 Great Queen St, London, WC2B 5DD.

This service is obligation free and consumers are in no way required to act upon the recommendations given.

Borrowers should contact 0800 71 81 91 or visit www.charcol.co.uk.

Back to top