SOURCE Ideas
Within the last 3 months Nottingham, Newcastle, West Bromwich and most recently Accord have disputed the addition of the redemption fee to the True Cost calculation. Their argument being, it is highly unlikely a broker will advise their clients to redeem their mortgage within the initial term and it is also unlikely a client choose to redeem their mortgage within the initial term regardless. If the client were to redeem in the initial term, then they argue that the ERC should also be calculated into the True Cost. They feel this is making their products look more expensive than that of their competitors when in reality the products are on par or more affordable.
SOURCE already provides the facility for the user to select which fees they want to include in the True Cost calculation in the True Cost and Fees section.
It is not a case of the broker advising the client to redeem the mortgage within the initial period, but having to include this fee as there it is there and whilst the applicant may not intend to redeem the mortgage in that period it could still be a possibility so it should be included in the True Cost. However, we do give the user the option to chose if they want to include this fee or not in the True Cost, so it will be down to each individual user if they want to include it or not.
The option to select which fees to include in the True Cost is also available in Live Sourcing in INSIGHT.
Below is the extract from the True Cost section of the User Guide which relates to selecting the fees to be included in the True Cost calculations
Include Fees Payable
This will allow users to control which fees are included in the true cost calculations. Fees that lenders do not allow to be added to the loan or are none interest bearing can be included in the calculation by selecting this option.
By selecting ‘YES’ these fees WILL be added to the true cost calculation as a ‘one off fee’, over the period selected for the true cost amount. By adding them as a ‘one off fee’ no interest will be incurred on these fees and nor will the monthly payment for the loan be affected.
Any of the individual fees that you have not selected to be included will not be added to the true cost calculation.
By selecting ‘No’ the true cost amount will NOT reflect any of the fees that cannot be added to the loan. Calculating true cost with fees payable added and fees added to the loan where allowable.
The Arrangement Fee and CHAPS Fee are greyed out because they have various rules applied by each lender if these fees can be added, must be added or cannot be added to the loan. As these are already controlled in the ‘Add Fees To Loan’ section and the different options that can be applied to these fees (except that they must be paid, just a question of when and how the lender allows this) they do not fit with the same logic of removing them completely from the true cost calculation, hence there is no separate option to remove these like all the other fees.
You have the option to set these in the User Settings, under the True Cost Default Settings for each of the product suites (Mortgage, Loan and Combined). By setting these in My Account every time you do a new source these, defaults will automatically be applied. The user will still have the freedom to change these on each case if they so choose to.