Almost 100,000 home buyers pay a fee of on average £1,500 every year
A higher lending charge (previously known as MIG or Mortgage Indemnity Guarantee) usually affects customers who borrow more than 90% of the value of their property and is typically around £1,500.
This charge is a particular concern for first-time buyers. It is a significant additional cost that first-time buyers have to meet at a time when they also need to find a deposit, meet legal and other costs involved with moving home and, in some cases, pay stamp duty. Nationwide estimates that a higher lending charge was paid by around 50,000 first time buyers in 2004. With average first time buyer house prices at £125,498, this means that some first time buyers could be paying around £1,800*. Nationwide also estimates that higher lending charges affect almost as many existing home owners (c.44,000) as first-time buyers.
Competitor comparison of higher lending charge based on borrowing £95,000 on a £100,000 purchase price property (95% LTV)***
Lender Cost
Halifax £1,450
Bank of Scotland £1,500
Abbey £1,600
Natwest £1,460
RBS £1,790
Unlike Abbey, Halifax and a number of other lenders, Nationwide does not have a higher lending charge. Borrowers could believe that they are getting a service by paying for the higher lending charge, however it is simply a fee which covers the mortgage provider in case these borrowers default on their loans – the borrowers do not get anything in return for their money.
