Mortgage exit charges

lisyloo

Our house has gone into probate today anyway

Is this really what you mean. Probate happens after someone dies, to sort out their estate.

Or did you mean something else?

Fairdo_2

Wow, what a thread! Looks like this is an emotive subject.

I can see the argument from both sides and am certainly frustrated at the lenders stance on this.

However, I admire MarkyMarkD for his standpoint.

I will start with the Pro standpoint (because it will be shorter).

Most Lenders have stated within their T&Cs that they can vary certain charges within certain "reasonable" levels. The simple answer to this is that by stating they are variable, they make it suitably vague enough that they can do pretty much what they choose.

In summary, a Lender could decide to charge £1,000 if they desired, but there are certain natural restraints which mean that they virtually test eachother out.

I'm no good at sending links, but the article below (if you can access it) by Ray Boulger shows the situation very well and mirrors my own thoughts on the subject.

http://www.mortgageintroducer.com/boulger/230405.htm

In the article, he states that Leeds & Holbeck bowed down to pressure when they increased their fees recently and brought it down to relatively lower costs.

Therefore, I agree with the fact that the only ways to bring this trend down wholesale would be:
in effect to vote with your feet (difficult because you do not know whether the alternative lender you may choose may go down exactly the same route!);
put large scale pressure on via the press and forums such as this or campaigns from masses of borrowers (the latter, again probably having limited scope as existing borrowers moaning about exit charges would not be existing customers if the lender bows down to make it easier for those people to leave!);
natural competition forces (lenders putting their own limits on charges to remain competitive)
or successfully complain individually as a previous poster has testified. Well done for that. True MSE behaviour!!!

That was the short bit. Sorry!

I personally am very frustrated with this trend, as being a Mortgage Adviser, I find it hard to be able to make true comparisons for my clients, as I need to take costs during the "Rate Control" (preferential rate) period, along with entry costs and expected exit costs. In essence, by default, I could say that in these circumstances, I am never doing my job properly if I do not know what exact figures I can assume. However, this has existed since I have dealt with mortgages as any variable rates offered by lenders are variable (funny that) and therefore, assumptions have to be made as to future figures for comparison purposes.

I have mentioned this on a few threads already, but I would say the reason Lenders are increasing the Exit charges at the moment is to try and stem the flow of increasing "Mortgage Tarts" who are getting wiser and not being loyal for loyals sake, as most lenders do not treat their client bank with any loyalty.

Lenders will make as much money as they can in a competitive market and currently need to recoup the costs they have had in staying compliant in the new regulatory environment. The quickest way for them to do this has been to increase their immediate charges: Arrangment/Booking Fees, Valuation Fees, Redemption Fees and other Administration fees.

As many Lenders have pushed the boat out with Entry Fees to a level that they can currently get away with (They still need to attract customers and build or maintain market share), the natural choice for them is to increase the Exit costs. This also points towards a trend that Lenders want to stop or reduce the amount of customers leaving through their back door when they have not made enough money from those customers.

It seems the way of the world at the moment and I am not condoning the lenders for this, but to some extent, they will do what they can to steer the market.

My rant over. Read the article if you can access it, it is quite interesting.

lisyloo

The simple answer to this is that by stating they are variable, they make it suitably vague enough that they can do pretty much what they choose.

I don't agree with that. Surely a "reasonable" charge has to relate to the costs involved and I believe my Ts and Cs do state this.
We are essentially talking about a bit of admin labour and possible some IT costs.
Neither have gone up significantly, in fact if they have been offshored to Bangalore they will cost a lot less.
If wage inflation is 3% - 4% and the costs of IT systems has gone down, then how can 50% increases be deemed to be reasonable?

Fairdo_2

Lislyloo

I don't agree with the increase either. I hope that is reasonably clear in my post.

What I am getting at, is that the Lenders state this in the T&Cs so that they have nice fluffy, vague language implying that these charges are variable and therefore, by not being explicit, this allows them to interpret "reasonable" how they wish.

In Arbitration, who can pass judgement on what defines Reasonable. Therefore, they would get away with it.

If nobody stands up and says "This is not reasonable and I challenge that" and without back up from the masses (Press pressure could help that, as knowledge is power and most people with interest in mortgages would agree with the dissatisfaction), then within 6 months or so, if all the lenders have reached a plateaux with these charges without too much resistance, then this will be considered the norm.

I agree totally with your views and the other posters, but I also understand why MarkyMarkD has said what he has. He is not necessarily defending the Lenders but explaining where they stand. Far be it for me to speak for someone else and if I am wrong I apologise.

I think that the more press about this and the more friction on these changes, the better, but I don't know whether the masses could impact on this before natural market forces take their effect anyway.

lisyloo

What I am getting at, is that the Lenders state this in the T&Cs so that they have nice fluffy, vague language implying that these charges are variable and therefore, by not being explicit, this allows them to interpret "reasonable" how they wish.

I believe my Ts and Cs refer to covering the costs of doing the job, so I don't think it's that vague.
Even if it said "reasonable", I don't think they would get away with it in front of a judge charging £1000 for 30 minutes admin.

Anyway, it's all rather theorectical.
I would personally rather put my efforts into what I and others can actually do in practice.

In real life, none of us are probably going to get as far a discussing these things in court with barristers so it's not really that relevant.

Efforts would be better concentrated on what we can do, which is complaining and taking then throught their complaints procedure and to the ombudsman. Then it's for him or her to decide.

I may be doing this shortly (I may not have a need if I sick with existing lender).

MarkyMarkD

Lisy

You've gone from stating categorically that your Ts & Cs refer to the reasonable costs of doing the job to stating that they "might" say this or you "believe" that they say this.

I personally don't know what my Ts & Cs say because I can't find them - Doh! But you were so emphatic earlier in this thread, so I'd greatly appreciate an exact quote from your Ts & Cs.

.ydavid

It seems that Abbey have also joined this bandwagen, I have just received a letter informing me that from the 11/05/05 the amount of £225.00 will be made to close a mortgage of £23,500 that I have had with them since 1983, with only three years to go. After a telephone conversation, I was informed that if I did not pay they would not release my deeds, perhaps it could be an economical way of having them stored.

scrunge

.ydavid wrote:

It seems that Abbey have also joined this bandwagen, I have just received a letter informing me that from the 11/05/05 the amount of £225.00 will be made to close a mortgage ...

I also have this letter from Abbey. Last year the fee was £120 (which is still extortionate IMHO) so this is a rise of 85%, which is nothing short of scandalous, especially as there's no explanation for such an exorbitant increase. If I decided I didn't want to pay anything at all, would Abbey be legally able to retain the deeds to my property? Wouldn't the deeds legally belong to me?

MarkyMarkD

Scott wrote:

You are technically correct. But the banks like to look at things from a purely profit way, and if they have to waive £225 to get an average of £5000 a year in interest from you, they probably would. If you put it to them in the right way.

I think you are confusing "profit" with "income". A mortgage customer might pay £5000 a year in interest, but the lender will quite likely make no profit at all, depending on the rate charged.

cloud_dog

MarkyMarkD wrote:

I think you are confusing "profit" with "income". A mortgage customer might pay £5000 a year in interest, but the lender will quite likely make no profit at all, depending on the rate charged.

I understand what you are saying but that's probably one of the most naieve statements I've read from you. Over the course of the products life (whether it is a SVR or a fixed, discounted rate of some sort / some period) the banks will make a profit.

For the SVR they borrow against the banks LIBOR or international monetry funds, and for a fixed / discounted they again fix their costs and offer a product that provides them with the level of margin they require.

Apologies if I've come across a bit hard but............

cloud_dog