Remortgaging homeowners warned over ‘secret last minute fees’ | Personal Finance | Finance
Many homeowners are seizing the opportunity to remortgage, hoping to secure lower monthly payments and relieve financial pressure as the UK experiences a steady decline in mortgage rates. However, as interest rates fall, brokers and conveyancers are issuing dire warnings about the potential pitfalls of opting for ‘free legal services’ that often accompany remortgaging deals. These seemingly attractive offers can harbour hidden costs that may catch borrowers off guard, undermining the financial benefits of refinancing.
With the Bank of England’s decision to cut rates in response to changing economic conditions, the mortgage market has become increasingly competitive, prompting lenders to entice customers with promotions like ‘free legals’. While the idea of saving on legal fees may seem appealing, experts argue that these offers may come with unexpected charges and complications that could negate any potential savings.
Michelle Lawson, Director at Lawson Financial, expressed concern over the common misconception that these legal services are genuinely free. “There is no such thing as a free lunch,” she told Newspage, emphasizing that lenders often promote ‘free legal services’ as a selling point. However, the reality is more complex. The firms contracted by lenders typically receive minimal compensation per case and recoup their expenses through additional fees charged to borrowers. Lawson recounted a troubling experience with one client, whose interest rate dropped by 0.75% during the application process. Despite the savings, the client faced charges of over £50 plus VAT each time the solicitors were asked to review a new mortgage offer, raising questions about the true value of ‘free’ services.
Emma Jones, Managing Director at Whenthebanksaysno.co.uk, added another layer of complexity, observing that these ‘free legals’ often lead to delays and frustration. “Fee-free legals seem to be the biggest pain during a remortgage transaction,” she noted to the news agency. For homeowners stuck on high standard variable rates, these delays can translate into significant costs. Jones encourages borrowers to consider engaging local firms with strong reputations, even if it means incurring some fees. “In the long run, it’s worth it to have reliable and timely service,” she advised.
The potential pitfalls extend beyond just financial costs. Craig Fish, Director at Lodestone Mortgages & Protection, warned that the lack of attention to detail in these free services can result in emotional distress for borrowers. “Free legals should be avoided at all costs,” he cautioned to Newspage, highlighting that many hidden costs are not included in the ‘standard’ service. This oversight can lead to complications that drag out the remortgaging process, further exacerbating stress for homeowners.
David Robinson, Co-Founder at Wildcat Law, painted a grim picture of the conveyancing industry, calling free legals a “recipe for disaster.” He lamented the industry’s race to the bottom in terms of costs, which has often compromised client care. The result, he argues, is that clients frequently enter transactions without being fully informed, leaving them vulnerable to additional charges that seem minor but add up quickly.
Dariusz Karpowicz, Director at Albion Financial Advice, summed up the pervasive issues surrounding these services. “Free legals might sound like a great deal at first glance—who wouldn’t want to save on solicitors’ fees? But as the saying goes, ‘you get what you pay for’.” He urged potential borrowers to scrutinize the terms of these offers, warning that hidden fees can turn a seemingly straightforward process into a prolonged ordeal.
As homeowners weigh their remortgaging options amid a favourable rate environment, the consensus among experts is clear: proceed with caution. The allure of ‘free legal services’ may come at a steep price, and thorough research is essential to avoid unexpected financial pitfalls.
