Fee for not taking out provider's insurance?

don9999

I'm about to take out an Alliance & Leicester 1 year mortgage.

I don't want to take their Home or contents insurance.

They are charging me £25 'insurance admin fee' for not taking their insurance out.

Are they allowed to do that? I 'thought' it had recently become illegal to 'force' people to take out own-company insurance.

Cheers,
Don

muckell

i was under the impression it was also. It might be worth a quick question with your solicitor who is dealing with the purchase/remortgage.

dunstonh

They cannot offer you different terms for not taking their insurances. However, they are allowed to charge an admin fee to look at your alternative arrangements.

Some house insurers will pay that fee. Some IFAs/mortgage brokers will too if they arrange the policy.

Compensationitis

They have to arrange an indemnity that covers the outstanding loan in case you fail to insure the property and it burns down, for example. It isn't profit and £25 is peanuts compared to what you will save in future years. I agree that you can find insurers and brokers who will pay the £25 to get you on their books but that shoudn't be your only reason to take out a policy, look at the cover, the premium and the service standards first.

don9999

Thanks for the advice so far. I'll be taking this mortgage out whatever.

It's only a £50k re-mortgage on a new house worth £350k. However, I thought it rather odd that they wanted to charge me an insurance 'admin fee' although I'm not taking out their insurance. If anything, I'm saving them any administration.

I 'thought' it was now illegal to penalise people for not taking out 'own-insurance' - same applies to travel insurance when booking a holiday.

The £25 is not a big deal in itself. It's just the principle that I'm questioning.

Cheers,
Don

MarkyMarkD

You're not saving them admin, you are costing them the commission on the insurance policy, and also (as Compensationitis) exposing them to the risk that you fail to actually take out appropriate insurance (or take it out, and let it lapse) and that their security burns down.

If you take the insurance from the lender, they have the security of knowing whether you are keeping it up-to-date and that their interests are fully protected.

Fairdo_2

Agree with the above. It is perfectly legal for them to charge an Admin Fee and many Lenders charge £25 or £30 for this. The other "hidden" fee tends to be the Telegraphic Transfer Fee of about £30 that Lenders charge for sending the funds electronically. Those tend to be the fees that most customers aren't aware of until the final stages.

don9999

Am going direct with A&L. It's only a 1-year deal, but no arrangement fee, and they will either pay for use of their own solicitor's or will pay £250 towards the solicitors of my own choice. I've allowed them to sort it all out. So it's free to me.

Rate is something like 4.8% for a year, with no tie-ins or redemption fees.

My current rate of 5.29% is about to run out, so I'm happy to switch with no fee, even though it is only for a year. I will continue to look around for good/better deals.

Cheers,
Don

herbiesjp

The exit fee for A&L is pretty high- £295 if memory serves me right. Will you re-coup this in the 1 year you have the lower rate for?