Unnecessary mortgage charges could have cost £1bn

Nationwide Building Society has estimated that UK mortgage customers have paid over £1 billion in higher lending charges since it stopped its own higher lending charge in 2000.

Most high street lenders charge a higher lending fee for customers who wish to borrow more than 90 per cent, more than 75 per cent in some cases, of their property's value.

Nationwide believe 800,000 home buyers have paid this fee, usually about £1,500, in the last five years and worryingly almost 500,000 of these are first time buyers.

They also have to pay a deposit, legal and other costs involved with moving home and most of them are required to pay stamp duty.

Nationwide executive director, Stuart Bernau, said: "Despite the negative publicity around higher lending fees, it is clear that many borrowers continue to find themselves faced with this charge at a time when their finances are already stretched and they are at their most vulnerable.

"Another cost of around £1,500 is the last thing they need," he added.

The higher lending charge can be added to the mortgage but over 25 years Nationwide estimates that a £1,500 higher lending charge will end up costing around £2,700.