Kicked when you're already down

Missing mortgage repayments and going into arrears could be costing borrowers even more than they think.

A study of 18 leading mortgage lenders by price comparison site moneysupermarket.com has uncovered vast inconsistency on fees and charges. For example, lenders such as Northern Rock and BM Solutions give one month's grace for a missed payment, but GMAC charges £50.

HSBC stands out as the bright light in the mortgage arrears arena. It doesn't charge its customers for a returned cheque or direct debit, missed payment or debt counselling.

Vulnerable customers who want to get a grip on their finances might find the fees they are charged for debt counselling particularly unfair. Many lenders, including Britannia and Bristol & West, charge £90 or more for this service.

BM Solutions, Royal Bank of Scotland and Bradford & Bingley are among lenders that charge £35 for a returned cheque or direct debit.

Worst of all, a Cheltenham & Gloucester borrower who had a returned cheque or direct debit, three months arrears and an arrears advice appointment would be charged £372.

As well as extra charges, the research also reveals some lenders, such as the Halifax, charge interest at a higher rate on the arrears.

Louise Cuming, head of mortgages at moneysupermarket.com, said: "Borrowers in the unfortunate situation of going into arrears can expect to face some punitive and unjust charges.

"Many lenders are quick to agree on a mortgage, but not so eager to help financially when their customer is most in need. Charging someone £372 is equivalent to raising the annual SVR rate on a £150,000 mortgage from 7.5 per cent to 8.49 per cent.

"We would question if these lenders are treating customers fairly, given the inconsistency of the fees and charges. Under the Mortgage Conduct of Business rules, regulated by the Financial Services Authority, all cases of financial hardship must be treated sympathetically.

"Lenders aren't charities, but no one wins if they automatically burden customers with more fees and debt. I'm sure customers in arrears are unaware that most lenders charge for every call they make and letter they send.

"The biggest outrage is that so many lenders charge for or outsource debt counselling, yet it is free with the Citizens Advice Bureau. Customers in arrears should ask their lender to waive these fees and remind them that HSBC doesn't make these charges."