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Door-to-door loan sharks have had plenty of publicity, but here are also many companies making money out of tenants’ right to buy their council homes.

One FT reader wrote to nominate door-to-door mortgage salespeople for the Doghouse. His parents received a knock at their council house door from a sales rep telling them how easy it was to buy their home.

They were persuaded by his sales pitch and paid a staggering £2,000 in fees to the company.

Through the broker, the couple ended up with a loan with an interest rate of a whopping 9.75 per cent. Our reader says: “My parents did not understand the finer monetary details, apart from they would pay less per month for their home, compared to renting.”

Companies targeting council house buyers make a big play of how much they can save by buying, rather than renting, but (no surprise) are shyer about publicising the real interest rates involved. An internet search will reveal plenty of companies offering deals on “right to buy” but no quoted APRs.

In many cases there is no need for council homebuyers to use these overpriced brokers and loan operators. As our reader says: “My parents have now moved their mortgage to a high street bank, with an interest rate well below half of what they were paying before.”

Drew Wotherspoon at independent mortgage broker John Charcol says there are three high-street lenders who are very active in the right-to-buy market: Abbey, Halifax and Nationwide. He says: “There is only one caveat in that people are encouraged to take a three-year product. There are penalties for selling on the property within three years. There are generally no disadvantages in the rates you get – these deals are sold under the same rules as the normal three-year deals.”

Right-to-buy tenants who live in tower blocks may have more problems getting a conventional mortgage. But a mainstream independent broker may well be able to help – don’t resort to the door-to-door salespeople.

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