Mortgage exit charges

ReportInvestor

The Times now takes up the case

"Discounted mortgages come with a sting

Melanie Bien, of Savills Private Finance, another mortgage broker, says: “How can borrowers accurately compare the cost of various loans if the lender can increase charges on a whim?” Abbey, one of the UK’s biggest mortgage lenders, is the latest to raise its exit fee: the penalty will increase by 25 per cent to £225 on Wednesday. Borrowers who are locked into fixed-term loans with the bank have no option but to pay this increased fee if they want to remortgage with another lender when their deal ends."

Times Money editor

"ONE thing unites Times Money readers. They are infuriated by the financial services industry’s fondness for the imposition of sneaky fees for anything from redeeming a mortgage to missing the deadline for the payment of a credit card bill by just one day. Our readers object not so much to the sums involved — although no one wants to hand over £200 to a bank — but to the stealthy way in which these fees often appear. Since the beginning of the year, fees, under many guises, are being introduced in the course of a contract, rather than at the outset."

MarkyMarkD

lisyloo wrote:

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).

I don't believe that these are guidelines. On the FSA's site, it says

Typically £75-200 as-well as any early repayment charge.

which suggests to me they are just providing an indication of what lenders charge - and that they are just out of date. I can't find anywhere evidence that this is a suggested maximum or a guideline.

lisyloo

Perhaps you are right in which case there has been some sloppy journalism in some of the articles.

Doesn't make much difference though.
At then end of the day it's the ombudsman who will get to decide whether these charges are reasonable.

On what basis would you justify 50% increases when they are defined in the terms and conditions as covering costs?

michaels

The figures for me are 160 on morgage start and 295 when redeemed. A&L also impose a high charge to redeem early hence there was no option to remortgage elsewhere when the price increase was announced. Not sure about the fsa but surely as I was effectively locked in this amounts to unreasionable t&C - am I allowed to contact trading standards / the oft for an organisation covered by the FSA?

MarkyMarkD

Ironically (given my position mentioned often in this thread) I have gone back to my YBS illustration and the exit fees are shown as £73.50! So I'm not quite sure how the increase of over £125 in my case is rationalised, if indeed it needs to be rationalised.

I understand that people are narked when things go up unexpectedly, by a significant proportion. But I can also understand the lenders' perspective that it's unreasonable to fix this sort of exit fee in advance when entering into a contract which may run for 25 or even 40 years.

Maybe the right solution is that these fees should be specified in the mortgage offer and increased on an RPI-linked or similar basis, rather than on the lender's whim.

lisyloo

But I can also understand the lenders' perspective that it's unreasonable to fix this sort of exit fee in advance when entering into a contract which may run for 25 or even 40 years.

I would certainly not demand this and I've not seen that any one else has.
I agree it's not reasonable to expect lenders to fix these over a long period.

I would be quite happy if they went up in line with costs. They are fully entitled to do this according to my Ts and Cs.

The kind of increase I would expect would be 3%-4% because that is what wage inflation is at the moment.
I would probably tolerate a little more, but I'm not aware of any reason why admin costs should have gone up susbtantially recently.

There is clearly a big gap between the reasonable 4% and the unreasonable 50%.

MrsAk_2

Fay wrote:

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!

Our mortgage is with Natwest and we have increased our borrowing twice over the last 9 years - we have never had to pay an arrangement fee or the £225 exit fee - and from what I can remember, last time we were planning to move our mortgage for a better deal (we'd just finished our fixed deal), they agreed to waive all charges, in order to retain our business, on top of offering us a good discounted rate - it might be worth pushing them on this point

MarkyMarkD

MrsAk,

The difference is that you haven't moved house and Fay has. The hassle for the lender is when you redeem one account and open a new one - not when you borrow more or switch products as you have, whilst not moving house.

lisyloo

Scott - You are probably aware of this, but mortgages aren't really portable.

A mortgage is a loan on a specific property.
When you "port" it, the charge on the first property has to be removed and a charge put on a second property.
The loan product might be portable, but the legal charge is not, hence there is some admin work to do.

Sound like you are aware of that though.
I agree with you that's it's "worth a try", however any inference from your post that there is no work involved in porting is not correct.
Legally it is a totally seperate mortgage.

Fay

Guys if you knew half the hastle we have had with natwest over this mortgage you would understand why I just have no motivation to have to call them again. At one point I told a customer service assistant that I was not happy with the service and I was thinking of going with another lender...her reply 'shall I cancel your account now then Miss'!!!!!

Our house has gone into probate today anyway, so we might not be needing the mortgage. Does anyone know, if we decide not to take the new mortgage but to stay where we are and retain our old one, I know we wouldn't get the £400 arrangement fee we have already paid, but would we have to pay it to stay on our old one again?