Lenders, exit fees and excuses

It would be fun to see the reasons lenders give the FSA in response to its call for them to justify raising their exit fees, as there can\'t be many good ones, says Drew Wotherspoon

With the Mortgage Strategy Summit taking place in Jerez last week and World Cup fever gripping most of the planet, it seemed sensible to write something on the global financial product that is the mortgage. But GE has done an admirable job of this in the magazine over the past couple of months with its Mortgage World Cup Focus, so I decided to concentrate on the subject I know best – exit fees.

The Financial Services Authority recently called on lenders to review their mortgage exit fees, following the completion of the regulator’s initial investigation into these fees.

The FSA says that contracts are not as clear as they should be and has questioned whether lenders that increase such fees during the term of a mortgage contract are being fair to consumers.

The simple answer to this is no. Consumers do not have to take one particular mortgage in the main. There are usually countless options open to borrowers these days and it is a matter of evaluating what is the best product for a particular borrower at a particular time.

But how can this be judged when the goalposts can be moved on a whim?

And as fully independent brokers, how can we be certain of the best recommendation when the fee at the end of a mortgage could move without any reason?

But we all know about this, just as we all know exit fees are a retention tool by any other name.

The FSA has asked some lenders to provide evidence on how the decisions were taken to raise the fees. The responses would make fantastic reading and I would love to be the man in charge of that postbag. I have desperately racked my brains for a plausible excuse that lenders could use but can’t think of one.

In fact, this esteemed magazine could have a great competition on its hands. Scrap the caption competition next week and see who can come up with the best excuse for putting up exit fees. Hundreds of creative types read this magazine so let’s hear from you. But whatever you do, copyright it. If it’s good someone may pinch it as there can’t be many good ones. I’ll start the ball rolling: “We didn’t want to put the exit fee up but the dog ate the deeds and we had to get them reprinted and couldn’t afford it.”

Not great – in fact pretty woeful I know, but I tried. I reckon lenders may find it even harder.