Hidden fee warning for first time buyers

04-Jun-2007

First time buyers taking out loans worth at least 90 per cent of the value of their property face even greater payment problems due to the presence of extra charges, a new study has suggested.

Two thirds of all prime lenders charge a fee ranging from seven to 12 per cent for properties with a loan to value (LTV) of 90 per cent, with borrowers taking out 75 per cent LTV also at risk, according to research from Moneyfacts.

Even those who avoid higher lending charges (HLCs) could find themselves forced to opt for repayments at higher rates of interest, the firm's Julia Harris has advised.

"While lenders can argue that HLCs and higher rates are paid for slightly different reasons, it makes no difference to the borrower where the extra costs ends up, either as an insurance or simply to reflect the higher risk. It's still an additional cost to the borrower," commented mortgage analyst Ms Harris, according to the Market Oracle.

Higher LTV mortgages rose to their highest levels for 12 months earlier this year, making up 16 per cent of borrowers in April, according to a survey published last month by Spicerhaart Financial Services.

To find out about those mortgages specifically aimed at first time buyers, see our best buys for first time buyers table.

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