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Mortgage loan rates made clearer

14 December 2004

Since the end of October mortgage lenders have been required to display the true cost of their mortgages, leading to a fairer deal for lenders Nationwide Building Society has said.

New regulations came into effect at the end of October requiring lenders to produce a Key Facts Illustration (KFI) to make clear the total amount of money payable over the full term of a mortgage.

Nationwide has said that looking at the true cost of a mortgage, through the KFIs, is a more realistic way of comparing mortgages than simply looking at headline rates in the best buy tables.

"Simply focussing on headline rates does not necessarily give the consumer the true picture of how much a mortgage costs," said Nationwide executive director, Stuart Bernau.

"The KFI however, has a lot more information. It details the headline rate, all fees, the total amount payable, the amount payable per pound borrowed and the monthly payments."

The KFI contains the following information to aid borrowers:
-Description and overall cost of the mortgage
-Details of monthly payments
-Warning of the risk of rising interest rates or falling income
-Fees and early repayment charges
-Details of insurance options and costs
-Explanation of flexible features such as overpayments and payment holidays