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They're at it again again; Nationwide's advert ridiculing its competitors for offering deals that were only available to new customers was hugely successful and very amusing.
For a short time, at least, most lenders got the message and seemed to steer clear of tricky little gimmicks and small print.
Mortgages are a serious business after all - just work out what percentage of your monthly pay cheque ends up in the hands of the bank or building society - so anything which doesn't smack of fair play should be driven out the market, but guess what? Some very old ideas are starting to resurface.
Insurance costs
Years ago everybody bought their home insurance with the mortgage. The lender, rightly, demanded that the house be covered appropriately and they arranged one big policy to which they simply added your house when you took out a mortgage.
It worked well enough. The lender was arranging thousands of policies so their buying power negotiated better terms for their customers and, even after pocketing a nice commission, the borrowers ended up paying much the same as they would if they had bought it direct.
It was the accepted way to buy home insurance and everybody was reasonably happy.
Then during the 1980's it all changed. The money men switched on to how much commission the bank could earn from selling lots of insurance policies and, at around the same time, companies like Direct Line worked out that by selling direct over the phone they could offer the same cover to customers at lower costs.
So a battle started, convenience versus cost, and it still rages on today.
Most people simply want to be able to compare the products they are buying and decide what's best for them. Only a fool would expect to buy a Ferrari for the price of a Ford Fiesta, but as long as you can see the features and the costs of each you can make up your mind which one is right for you.
For mortgages it's not quite so easy. Mainly because most of us can't work up the energy to read all the small print, but also because the sellers often do their best to make it difficult to compare.
Don't fall for gimmicks
And things have moved on since the telephone revolution. Now most products are sold direct and the internet has overtaken the phone as the route to buy. The web also allows sophisticated comparison tools which should make the consumers life much easier.
However, many lenders still try to confuse us all with lots of distracting little gimmicks. Most work in the same way as your supermarkets 'get 3 for the price of 2 offers'. They hope you assume if you buy lots of products from one source then the total cost will be lower.
When I buy bottles of wine from the huge range in my local supermarket my eyes tend to be drawn to the big day-glow stickers announcing this week¢s half price offers when making my choice. Recently RBS brought out a banking equivalent of that offer when brands NatWest and Royal Bank of Scotland announced a range of mortgages where customers who already held one of their packaged current accounts could get up to 30 percent off their application fees. That's all very well, but let's faces it, based on a £150,000 a £150 saving on a 5-year fixed rate application fee is only a fraction of the £720 you would typically pay over 5 years in current account fees* (see below).
As the mortgage itself was already more than £200 a year more expensive than the best mortgage deal available then, the saving heralded merely becomes a frothy nonsense.
Halifax also plays this game. They say they will reward people who open a salary-fed current account by offering them free legal fees on some mortgages when they move house. This saving, which is worth around £300 is very nice but comparisons of the true cost of their 3 year fixed rate deal show that it will cost the customer more than £1600 more than the best deal available from Market Harborough BS over the 3 years period* (see below).
Return of tie-ins
The return of tie-ins is yet another result of the mortgage market squeeze. Lenders increasingly look for ways to boost profits in a low interest rate environment and signing customers up to current accounts is a good way to ensure they tie-in borrowers for as long as possible, but it is not always good for customers.
A year ago tie-ins were looked on as the unacceptable face of mortgage lending but nowadays almost anything goes and borrowers have to jump through more and more hoops just to get a mortgage.
The real problem with tie-ins is however that they make it harder to compare mortgages and to find out the true value. Fortunately our tiscali mortgage finder lets you work out exactly the true costs of every mortgage and to compare them all to see whether you really are getting the best deal.
* Figures based on £150,000 advances at 60% LTV on 20/1/09 using mform.co.uk data
