Lenders rubbish idea of transferable exit fees

Hamptons Mortgages’ call for lenders to take on borrowers’ exit fees from their previous lenders has been criticised by lenders.

The London brokerage made the suggestion following the Financial Services Authority’s call for lenders to implement justifiable and fair exit fees and consider whether borrowers think their terms might be unfair.

Jonathon Cornell, technical director at Hamptons, says: “High administration and exit fees cannot be considered treating customers fairly. Lenders are already taking on the upfront costs of new mortgages such as valuations and conveyancing. Surely the next logical step is for them to take on a borrower’s exit fees from their previous lender.”

But mainstream lenders have rubbished the suggestion as unfeasible and difficult to implement.

Paul Fincham, spokesman for Halifax, says: “There are two concerns as we see it. First, from an administrative point of view, how would this idea work? Second, some lenders already offer remortgage deals with cashback which is a similar solution.

“Having the new lender take on and pay the exit fee would be difficult to put into practice. The fee is there to cover the cost of the work customers request.”

Steve Gracey, spokesman for Alliance & Leicester, which has one of the higher exit fees on the market, says: “We believe our exit fee is appropriate. While it may be seen as high a mortgage contains a range of rates and charges and we have other fees that are lower than those of our competitors.

“We do not intend to provide cashback to cover previous lenders’ exit fees, either early repayment charges or redemption administration charges.”

Tamsin Hemsley, spokeswoman for Nationwide, says: “The problem with a new lender paying a customer’s exit fee is that it could lead to lenders raising exit fees by large amounts because they know these will end up being paid by other lenders rather than consumers.”

The FSA says if there was a change in the way exit fees are paid it would be a purely commercial decision and still would not address the issue of fairness.

An FSA announcement regarding an initiative looking at fair exit fees is expected in September.