Mortgage exit fees to be scrapped
August 13, 2007
According to recent reports, mortgage exit fees, which were being charged by many mortgage lenders when the loan was repaid, are to be scrapped following pressure from campaign group and financial regulators in the UK.
A number of mortgage lenders have decided to abolish this fee, with some in the process of scrapping it and some having already scrapped the fee.
Earlier this year consumers were urged by the Financial Services Authority and campaign groups to try and reclaim some of the mortgage exit fee that they had paid to their lenders. The concerns came after campaign groups pointed out that mortgage exit fees had rocketed by 100% or even 200% in some cases over the past four years. Some lenders were charging £300 at the end of the mortgage, where as several years ago the average fee was under £100.
The FSA decided that these fees were unfair, and that there was nothing in the mortgage agreement that stated lenders had the power to impose these rises. The decision by many lenders to scrap the fees is good news, but experts state that they will simply make up the shortfall somewhere else, with some already charging higher mortgage arrangement fees, which will help to recoup lost profits from the loss of mortgage exit fees.
One industry professional stated: “If you going to cut off one stream of income - in this case exit fees - it is logical that some lenders will look to raise money elsewhere.”
He added that around ten leading mortgage lenders had already raised their mortgage arrangement or set up fees quite significantly, and that in some cases the mortgage arrangement fee had gone up by £1000. Lenders that have raised their set up fees include the Woolwich, NatWest, and Lloyds TSB.
Alan Wright
13th August 2007
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