Mortgage exit fees
Lenders make refunds

Mortgage lenders handed borrowers a reprieve recently as the majority of banks and building societies agreed to refund customers who had paid higher-than-anticipated exit fees.

The Financial Services Authority in January expressed concern over the level of these exit fees, which have moved up from around £50 10 years ago to as much as £295 today. The regulator gave lenders a month to waive or cut fees or justify their higher charges.

Mortgage exit fees cover the administration involved in closing down an account when the holder pays off the debt or switches to another lender. The actual cost to the lender is thought to be around £65.

The FSA's main concern lay with customers that had been charged higher exit fees than had been stipulated in their mortgage contracts. The initial quotes are not binding and thousands of customers ended up paying four or five times the sum they had expected to pay.

According to the FSA, the vast majority of lenders agreed at least to refund the difference between the fee cited in the contract and the fee actually paid, which could be as much as £200. Some smaller, more specialised lenders refused to offer refunds, but these lenders typically have fairly competitive fees or have only increased their fees by around £20 in recent years.

There has, however, been little evidence of lenders reducing mortgage fees for existing and future customers or for borrowers who agreed to a higher fee when they took out their mortgage.

This article is for your general information and use only and is not intended to address your particular requirements. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without appropriate professional advice after a thorough examination of their particular situation. Your home may be repossessed if you do not keep up repayments on your mortgage.

Article date: 03.07