NEW Mortgage Exit Fees Discussion

MarkyMarkD

mayb wrote: »

MarkyMarkD forgive me I know you do not like people posting the same thing in two different threads, but I posted it in the Mortgage exit fees successes and failures in response to something that came up there and then decided it belonged here instead. As it could belong in either I have posted it twice.

You may be able to answer this one for me. As I understand/remember it (I am not as young as I was so could be faulty here) there was some ruling that if a Mortgage Lender had a product offering better terms than existing customers were enjoying - they had to offer that product to existing customers. Stop me if I am wrong but should that not mean that they cannot penalise the customer if they chose to change product any more than if the customer changed mortgage to go to another company altogether - in other words MEAFs. Otherwise they are not really offering the existing customer the same opportunity as new customers are they. They cannot have to carry out the same amount of work as with a new customer so it cannot cost them that much to make a switch. I know you are going to say they can charge what they like and the customer does not have to switch - but that is flying in the face of the original ruling isn't it? Would you not expect them to offer a deal to the existing customer rather than risk losing that customer to another company. It does appear to be a bit of opportunistic money making. as they could lose the business altogether and only make the MEAFs anyway.

I've replied on the other thread here: http://forums.moneysavingexpert.com/showthread.html?t=363731&p=5034072

mayb_2

Thanks MarkyMarkD - I have pasted it here as I wished to respond and this thread is more appropriate to a discussion.
Quote
"Of course I can answer that. There's no such obligation on lenders and hence your views about "penalising" customers who change product are incorrect.

When you buy a 25 year (say) mortgage with 2 years (say) fixed or discounted, you are legally buying a 25 year mortgage and at the end of the 2 years you are legally obliged to pay the higher (SVR or similar) rate.

If you want to change that deal, then you can only ask the lender if they will allow you to switch product; there is no obligation on them to allow you to do so at all, and any switch they offer can be conditional on the payment of any switch fee they choose.

At the end of the day it's all about YOUR choice - you originally committed to 25 years (or whatever) and you might be offered a choice of a product switch, often at a cost. If you don't like the switch cost, you don't have to take the switch.

It's not flying in the face of "the original ruling" because there never was such an original ruling."

I understand what you are saying here but I am sure there was something about offering better deals to new customers than those available to existing ones. This may have been concerning the prevailing interest rate rather than fixed terms though.

I don't think this makes it a viable proposition to always stick with the company and just change product if you have to pay MEAF's and new product charges as well. It would appear that you are paying for some services twice. Would you be expected to pay for a valuation on the property and legal fees concerning the deed for instance if you are just changing product. It may be perfectly legal for the company to impose these charges as you can accept or refuse the deal but it strikes me as being sharp practice to charge for services at the same rate as a brand new customer would incur and charging 'exit' and 'entrance' fees would appear to fall into this double charging category.

crispeater

mayb wrote: »

I think there are always MEAFs to pay when you finish the mortgage crispeater - as that is what they are Mortgage Exit Administration Fees. You can claim if you were charged more than the amount agreed at the start of your mortgage. Why not send the template letter available on the main site to your mortgage company and see what happens.

cheers for that mayb, as i said im a bit of a simpleton and especially when it comes to stuff like this, it just all gets blown over my head but i will definately give it a go

MarkyMarkD

mayb wrote: »

I understand what you are saying here but I am sure there was something about offering better deals to new customers than those available to existing ones. This may have been concerning the prevailing interest rate rather than fixed terms though.

I'm afraid not - you are dreaming this ruling up as it never happened.

I don't think this makes it a viable proposition to always stick with the company and just change product if you have to pay MEAF's and new product charges as well. It would appear that you are paying for some services twice. Would you be expected to pay for a valuation on the property and legal fees concerning the deed for instance if you are just changing product. It may be perfectly legal for the company to impose these charges as you can accept or refuse the deal but it strikes me as being sharp practice to charge for services at the same rate as a brand new customer would incur and charging 'exit' and 'entrance' fees would appear to fall into this double charging category.

You don't have to pay lots of different things if you stay with the same lender and simply change product.

Basically, comparing product switching to remortgaging:

- if you remortgage, you have to pay your old lender MEAF
- if you remortgage, you have to pay your new lender a valuation fee*
- if you remortgage, you have to pay a solicitor legal fees*
- if you remortgage, you have to pay your new lender a product fee*

* all of these might be waived/paid by the new lender, but if they do this, the product rate will be less attractive than if they don't

- if you product switch, you may have to pay your existing lender a product fee
- if you product switch, you may have to pay your existing lender a product switch fee (sometimes called a mortgage review fee or similar).

Typical costs for remortgaging might be £250 MEAF, £300 valuation fee, £250 legal fees, £500 product fee = total maybe £1,300.

Typical costs for switching product might be £250 product switch fee and £500 product fee = total maybe £750.

Switching products is, all things being equal, a lot cheaper than remortgaging.

It's important to realise that mortgage product fees are not very much at all to do with covering costs that the lender incurs. They are all to do with covering the fact that the rates offered by most mortgage lenders are loss-making.

mayb_2

Thanks for explaining that MarkyMarkD - why would they lend money and make a loss? "rates offered by most mortgage lenders are loss-making." I don't see the point if they are planning that the only money they make will be up front charges that means may be just £750 over the mortgage term? So I assume the loss making refers to the special offer period only. I have so far always found it cheaper to swap mortgage companies rather than take a new product from the company I am already with - taking in to account the savings to be made on the interest rate charged as well.

silvercar

anyone know how far back you can go in reclaiming these MEAFs?

I moved mortgage from Halifax to coventry BS in either 2000 or 2001. Is that to long ago?

I remember something about a 6 year rule, but 12 years if it relates to secured loans, so am I within the time frome to claim?

MarkyMarkD

mayb wrote: »

Thanks for explaining that MarkyMarkD - why would they lend money and make a loss? "rates offered by most mortgage lenders are loss-making." I don't see the point if they are planning that the only money they make will be up front charges that means may be just £750 over the mortgage term? So I assume the loss making refers to the special offer period only. I have so far always found it cheaper to swap mortgage companies rather than take a new product from the company I am already with - taking in to account the savings to be made on the interest rate charged as well.

Lenders don't want to make a loss, but most discounted/fixed rates are loss-making simply because of the competitive nature of the market with dozens of lenders competing against each other. So in many cases the profitability of mortgage lending boils down to the up-front charges (less the up-front costs, which can be quite significant) and any period that people pay the non-discounted/fixed rates at the end of the discounted/fixed term.

I think that people who find it's better value to constantly remortgage, rather than to switch products, chose their original lender badly. Most people don't ask their lender at the outset what products will be available to them when they come to switch. But now quite a few lenders offer the same products to switchers as to new borrowers meaning that it should be less common for borrowers (from these lenders) to need to remortgage rather than switch.

The whole mortgage market is incredibly inefficient, if you think about it. How can it possibly make sense for it to be cheaper for borrowers to pay solicitors' fees, valuation costs, MEAFs, etc. than to simply switch products with their existing lender? The fact that it often is must mean that the pricing of products (or the incentives offered by other lenders to switch) makes no sense.

ldt2911

I've just made my phone call to Cheltenham & Gloucester to reclaim my exit fee - which was surprisingly a hassle free call. I needed to quote my mortgage number and give some details about closure date and property address but apart from that it was simple.
The customer advisor confirmed that I was eligible for a refund and quoted me "£129.58". I originally paid £225 and as the Cheltenham & Gloucester was following the FSA guidelines my contract in fact stated the my exit fee would be £100. Therefore I should received £125 plus interest. Now, the call took about 20 minutes but I suppose at the end of the day I'm getting some of my money back! (And I used my free minutes!)
SO, have a go - it's only a small amount of time for an extra boost in your account.

Lesley[/COLOR]
:j

julestwo

I have two mortgages and I wish to repay them both in full. They are both interest only. My Abbey mortgage of £130,599 (a year old) has 2 charges; Cashback charge £171.31 and Repayment fee £225, which does not seem bad compared to my CHL mortgage. I originally had an opening balance of £120,365 in April o4. On the 21/03/06 I repaid £60,000 and was charged a General Fee of £75 and a completion fee of £301.49. The cost now of repaying this mortgage (now £60,223.84) is Sealing Charge £170.00 and a whopping early repayment charge of £3011.19. Is this fair? How can it cost me so much more to repay this mortgage (which is smaller) than my Abbey mortgage>

I would be gratefull for any feedback/advice before I go in guns blazing. Which of all of these fees can I claim back, and can I query the enormous £3011.19 repayment charge?

I look forward to hearing from anyone who can help

Julie Swift

sootie_2

just phoned my old mortgage company and have been told that because i had taken out equity release i would have been advised at the time that the exit fee had gone up from 75.00 to 100.00 and looking at my records they couldn't find how much i had paid but it was looking more like 225.00 but they don't think i will get anything back bit they will look into it and get back to me within the next 2 weeks. i have all the old paperwork including the equity release and can't find anything in it to say that it had gone up. i really don't understand any of this the way i see it is even if they did tell me it had gone up they still owe me 125.00. should i just wait and see what they come up with or give them another call?