Mortgage exit charges

c_smith

Actually, when I took my mortgage out with the Alliance and Leicester just over two years ago, the exit charge was only £75, so we are talking about a £220 rise over two years!! Not long after that it rose to £85, then to £150, before they walloped it up to £295.

I can't possilbly see how they can justify this. What work is actually involved in closing a mortgage account that can justify high charges such as these?

Rik_S

I`ve just left A&L and I am complaining about the charge. I`ve had previous A&L mortgages, but I will not do so again simply because I do not know what under hand charge they may bring in.

I don`t mind paying a realistic fee but I do mind paying an over inflated one.

I no longer have any faith in A&L.

MarkyMarkD

@ C_Smith

Your memory is almost definitely incorrect. I redeemed my original A&L mortgage in 2000 and paid £150 which was made up of two separate £75 fees - something like a deeds release fee and a sealing fee. I have the amount recorded in my Quicken financial software so I'm not making it up!

"What work is involved in closing a mortgage account" is completely irrelevant, to be honest. What is this concept that banks can't make money about? Do you expect to pay wholesale prices for everything you buy in Tesco?

c_smith

I stand corrected then. I've just had a look and it appears you are probably right about the two separate charges - another con on the part of the A&L. At least now they have consolidated them into one fee, albeit an extortionate one.

cloud_dog

I think all the financial institutions are looking for ways of recovering money from offering top-rate mortgages. You may have noticed that recently the 'reservation' or 'application' fees have increased quite dramatically (from an average of £295 to around £395 or £495, etc). And the increase in exit fees is another way of recovering money for someone who is leaving the company and who may also view a few hundred quid, when compared to many ten's of thousands, as quite insignificant.

Surely this sort of increase in both, but especially exit fees, cannot be justified, and is moving the goal post once you've signed up. If it were me I'd complain.

cloud_dog

lisyloo

"What work is involved in closing a mortgage account" is completely irrelevant, to be honest. What is this concept that banks can't make money about?

I don't agree with that.
I have read my lenders Ts & Cs (alliance & leicester).

I don't have the exact words to hand (can dig them out if it's really required) but it talks about charging reasonable fees to cover the work involved.

I think the terms and conditions are not irrelevant, in fact I think they are legally binding on both sides.
What is qiestionable is the interpretation of words like "reasonable" etc.

I persoanlly think that very large increases (like 50%) with no justification are unreasonabe.
Also note that the FSA produces guidelines for what should be charged and A&L are above the maximum (not sure whether it's by £60 or £100 as I've seen both figures reported).

Of course banks want to make money, but they have to do it within the legal bound of the terms and conditions that THEY specified.

lisyloo

Here is another recent article on the subject (doesn't look like any movement from A&L).

http://www.thisismoney.co.uk/mortgages/mortgages/article.html?in_article_id=399967&in_page_id=58

The article agrees with my last point that the fee is meant to cover the costs (according to the terms and conditions that A&L wrote).

"The fee is called a 'redemption administration' charge and is supposedly levied to 'reflect the costs and processes' involved in closing a mortgage."

ReportInvestor

MarkyMarkD wrote:

I was being sarcastic!

So was I. Your stalwart defence of A&L seems flawed and out of place here. Lenders should not be allowed to ratchet up other charges - effectively changing the rules for borrowers after roping them in. The press and MSE rightly expose A&L for being the worst example of a nasty trend.

It means borrowers don't know what they are getting and can't compare like with like when they enter into the mortgage contract. That's bad. Full stop.

MarkyMarkD wrote:

I don't really see any sum in the range of £200-£300 as "extortion" or "holding customers to ransom" - they are trivial amounts in the context of most mortgage accounts IMHO.

Saving a "trivial amount" of around £100 - the difference between A&L's charges and the industry average - is surely what people come here for?

And it's not seen as trivial by executives keen to use all the tricks. Where A&L leads, others will follow - as the Yorkshire mutuals are showing.

lisyloo

they are trivial amounts in the context of most mortgage accounts IMHO.

We all have an amount where we wouldn't bother taking action.
For me it's about £30.
i.e. I won't bother going to the hassle of moving my ISA for only £30 per annum.

For me £100 is worth writing a few letters for.

As well as being a couple of curries or nights out :-) there is also the principle of the thing.

I don't agree it's a trivial amount and I don't desperately need the money.
Apart from the principal of the matter, I don't want to give away £100 needlessly.

Fay

We have our mortgage with Natwest and are taking out another mortage with them for a higher amount...and we still have to pay the exit fee on our first mortgage! Its 225 with them and its money that we really don't have at the minute. We are only on a year's discounted deal with them and when they talked us through the charges they never mentioned this one (Originally we were going to port our mortgage and take out further lending for the rest-they advised to start again) so its going to cost us £400 for the arrangement, £225 for the exit and in a years time another £400 to change again and possibly another £225 if we move! I think it is a bit OTT!