But this way, you end up paying interest on the whole lot."This could mean, for example, that over 25 years, a £1,500 HLC ends up costing you nearer £2,700, reports Nationwide.Mr Cotton points out that some HLC-free lenders may offer home loans at a more expensive interest rate. Nearly 500,000 of these were first-time buyers - the very people who can least afford it.The list of those that have scrapped the charge includes Cheltenham & Gloucester, Egg and Standard Life Bank. "It protects the lender and not the borrower - and yet the latter has to pay. It is an outrageous and outmoded charge."She adds that if a bank or building society has concerns about the borrower defaulting, it begs the question of whether it should be lending in the first place."Credit checks and affordability assessments should mean the lender is doing enough to protect itself," she adds.Critics question how this extra cost can be justified, especially when a growing band of lenders have withdrawn it.In a recent report, Nationwide building society - which abolished its own charge in September 2000 - found that 800,000 borrowers had paid £1bn in HLCs in the past five years.
But mortgage specialists have long dubbed the fee "outdated"."If there is any shortfall between the price the property is sold for and the mortgage amount, this insurance covers the difference - so the lender isn't left out of pocket," says Melanie Bien, associate director at broker Savills Private Finance. This is the higher lending charge (HLC), previously known as the mortgage indemnity guarantee (MIG). It typically costs £1,500 and is levied by three-quarters of lenders, according to financial analyst Moneyfacts, on those who can't afford to put down a deposit of 10 per cent of the asking price. It is there to protect the lender if a borrower defaults on the mortgage repayments and the property has to be repossessed. But insurers emphasise you should exercise due care and attention.".
So you've taken out the mortgage, you've paid the solicitors' and surveyors' fees and you've stumped up for the stamp duty. Your savings have all but been swallowed up by the process of buying a new home, and then the lender taps your wallet again for something that won't benefit you at all. Homeowners are urged to check they are adequately covered against accidents. James Harrison of the price comparison service Insurancewide advised householders: "Your home contents policy should cover you for accidental damage caused by fire to anything in your garden, including the shed - or any damage you cause to your neighbour's garden. Churchill Insurance found that nearly two million people in the UK had reported damage to their home or car as a result of fireworks going astray. For example, more than a quarter of householders do not lock their front door when at home. Accidental damage also leads to a sharp rise in claims on buildings and contents policies at this time of year.
