Hamptons International Mortgages has called on lenders to act on unfair exit fees.
When borrowers pay off their mortgages or switch to another lender they are often charged mortgage exit administration fees by the previous lender. Over the past decade these mortgage exit fees have soared by as much as 400% says Hamptons.
Moneyfacts research shows the exit fees for top mortgage lenders as of August 1 2006 are as follows:
Mortgage Lender Exit Fee
Abbey National 225
Alliance and Leicester 295
Bristol & West 195
Northern Rock 250
The Royal Bank of Scotland 225
The FSA has recently become particularly concerned with some lenders practice of writing into mortgage contracts the freedom to increase exit fees without prior agreement with the borrower.
Such practice could be seen as a breach of the FSAs 2004 guidelines on Treating Customers Fairly and lenders are now being asked to implement justifiable exit fees and consider whether their terms might be considered unfair and misleading for the borrower.
However, in a more radical attempt to combat these increasing fees and champion Treating Customers Fairly, Jonathan Cornell, technical director at Hamptons International Mortgages calls on lenders to offer the ‘Real Fee Free Mortgage’.
He says: High administration and exit fees, well in excess of any justifiable costs incurred by lenders, can not be considered Treating Customers Fairly. In an increasingly competitive mortgage market lenders are already taking on the upfront costs of a new mortgage, such as valuations and conveyancing in order to attract clients.
“Surely the logical next step is for them to take on a borrowers exit fees from their previous lender. Only through such forthright measures will real pressure be placed on the industry to readdress and eradicate the disproportionate nature of such fees.”