High-fee mortgage broker warning

A warning has been issued to borrowers planning to remortgage their home to pay Christmas debts to beware of high-fee brokers.

New research has found many brokers providing mortgage advice are charging fees as high as ten per cent to customers.

And with many of these targeting the subprime mortgage market, it is people who already have debt problems who are being hit hardest by crippling fees.

In the mainstream "prime" market charging a fee for mortgage advice means borrowers can guarantee the information they are receiving is completely independent. However, lenders pay brokers very high commission for sub-prime mortgages, making brokers' fees look heavily inflated.

Katie Tucker, technical manager at John Charcol, which provides free advice to people with credit problems and carried out the research, said now is the time for borrowers with debts to be ultra-vigilant.

She added: "January is typically the longest month between paydays, so borrowers feel the pinch of their mortgage payments, particularly if their initial rate has come to an end and it's time to remortgage.

"Borrowers who have credit problems are most vulnerable – they tend to turn to one of the many subprime brokers available, to consolidate their debt into one loan, second mortgage or remortgage."

Many borrowers were not aware, Ms Tucker continued, if they have been making mortgage, loan and credit card payments on time and in full for two years, they will have repaired their credit rating and will be eligible for a normal prime mortgage.

She said searching for a broker which did not charge a fee and had access to both the subprime and prime markets would ensure that all options were explored for borrowers.