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Should you have to pay to redeem your mortgage early?

Last week Alliance & Leicester decided to fix its exit fees at 295 so borrowers know at the outset of the loan how much they will have to pay if they redeem their mortgage early. Exit fees – and A&L for having one of the highest charges – have been criticised by the industry and consumer groups as an unfair charge.

So, this week Mortgage Strategy asks…
John Sturgeon, 35, director – No, I do not think you should have to pay redemption fees. I have a mortgage and have had to pay exit fees previously when I have switched mortgages. I always go though a financial adviser and have an IFA who advises me on the best products available and I tend to switch every two years.

Frank Brady, 37, director – I don’t think people should have to pay to redeem their mortgage early. I do not have a mortgage at the moment. I realise that redemption fees apply to most lenders and banks but those that waive these fees would prove more popular. It would be a good selling point. Redemption fees are just an extra tax. It’s a similar story in other areas of financial services – for example, in Europe when you transfer money it goes into your account the next day but in England it takes five days and you lose interest during this time.

Steven Martin, 37, accountant – It is a nominal amount. I have never taken out a mortgage and I cannot afford one at the moment but the redemption fee cost would be something that would influence me. If banks and building societies offer lower redemption fees I would probably opt for them. When it comes to taking out a mortgage I would shop around first and look at factors such as early redemption fees.

Bernard Kenefeck, 48, IT technical manager – No I do not think there should be exit fees when switching mortgages. I have been with the same lender for a while because it has a good rate. I do not have to pay redemption fees with the Yorkshire which I have my mortgage with. A redemption fee was something I looked at when taking out a mortgage. The Yorkshire offers me a great rate and it is the best building society around. A financial adviser helped me find the best rate suited to me.

Andrew Tolmie, 33, business systems analyst – Redemption fees are accepted as a given. When you take out a mortgage you tend to shop around for the best deal. For the last five years I have been taking out two-year fixed rates, the latest of which is up for renewal soon. I looked around myself when choosing a mortgage because it is not worth paying for a financial adviser. Financial advisers give you information that you can find out yourself. In the grand scheme of things paying 400 to switch mortgages is peanuts and it would just add onto the cost of a new mortgage.

Paul Carter, 32, public servant – I don’t think you should have to pay to redeem your mortgage early. It seems cruel to stick an extra charge on. I got a mortgage around two months ago and the redemption charge on it is quite hefty. Other people I know have been hit by such charges and it seems to me that banks aren’t telling people the full truth by not fixing these fees. However, the charge isn’t an issue for me as I don’t plan on leaving my mortgage early.

Ian Dickie, 35, English language teacher – I recently got a mortgage and I don’t think people should have to pay any fees to change provider. Redemption fees probably dissuade people from moving mortgages as not only is it a hassle in the first place but also there are too many associated fees. I imagine a lot of people can’t be bothered and so stick with their original mortgage. These days people are so busy anyhow and mortgages are time consuming. I went through a broker who did it all for me and because rates and circumstances change the next time I review it I may stick with him. I can’t see what the excuse is for charging redemption fees – it’s just cheeky.

John Leonard, 31, system administrator – I don’t have a mortgage but redemption fees would influence my decision when choosing one. I didn’t know such charges existed and it’s scary to learn they do. I have a low opinion of banks generally and these types of hidden fees seem typical of them. So on one hand it’s a surprise, but on the other, it doesn’t surprise me at all. When it comes to getting a mortgage I’ll probably just go to my bank because I’m lazy.

Badricia Beireiia, 26, student – I don’t believe lenders should charge people to redeem their mortgage. I have lived in the UK for seven months and rent but back in my native Brazil I own a property and have a mortgage. Over there banks also charge to switch mortgages and the charges are high. What do banks do to earn that money? In Brazil people don’t tend to move house much or switch mortgages because it is too expensive to do so.

Chrissie Moran, 25, researcher – Moving to another bank should be free. The reasons an individual wants to change should be taken into account and the fees should be adapted to their circumstances. But banks just want to get more money out of people. Would it deter me? The whole thing would – I can’t see myself getting on the property ladder in the next two or three years as it’s so expensive. When the time comes I will probably use the internet to research what deals and see how much it will cost me.

Lavinia Mullins, 32, receptionist – It is appalling that banks and societies charge an exit fee when people want to switch mortgages. If people aren’t informed or aware of this fee when they get a mortgage then it’s not fair. It seems like another con. It shows you cannot really trust banks and societies.

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