Mortgage exit charges

lisyloo

I'd greatly appreciate an exact quote from your Ts & Cs.

From Alliance & Leicester Mortgage Conditions 2002

EXPENSES
22.1 Exames of our expensses include all costs and expenses which we incur

(a) - (e) omitted (not relevant and too much typing)

(f) in discharging or transferring the mortgage.

(g) in releasing the property or the property rights or any plan from our rights under the mortgage.

(h) - (l) omittled(if you want them I'll have to do a scan)

(m) in carrying out any administrative work or providing any administrative services in connection with the mortgage or the property Any administrative costs we charge will be no more than the amount we reasonably estimate to represent the cost to us of doing the work in question.

---

You may of course interpret them differently to me.
But I see that A&L have directly related the charges to the cost of doing the work.

MarkyMarkD - How can they legally charge whatever they like, when they have said it's the amount they estimate for the cost of the work?

Fairdo - Do you still think this is so totally wooly that they can charge what they like? I don't. I think they have pegged it to tangeable costs which are not rocket science to estimate.

I would be interested in whether your views have changed since you've seen the actually terms.
Personally I don't think it's that open to interpretation but other may disagree.

lisyloo

Hi Scott,

I agree that a lot of people might need to be employed, even though some of them are only contributing 5 minutes work.
Why though would the costs need to rise by 50%, surely all of these people were employed before even though some of them might have been in Brighton and not Bangalore.

MarkyMarkD

What's that meant to mean? No A&L staff have moved from Brighton to Bangalore! All A&L's call centres are in the UK - quote from speech given to UBS last week by A&L's Chief Exec.

MarkyMarkD

cloud_dog wrote:

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

Yes, you have. It was Scott being naive not me!

If you look at a "best buy" mortgage product, and hold it for the minimum term, it is NOT profitable for the lender. It's only profitable if you:

(1) pay fees;
(2) buy other products; or
(3) stay on standard variable rate after the term.

That's what I was trying to say. It's irrelevant that you pay the lender £5,000 a year in interest - that's probably a loss of £100 a year for the two years of the discount or fix in many cases. Hence profit <> income by a very long chalk.

lisyloo

What's that meant to mean? No A&L staff have moved from Brighton to Bangalore!

I apologise and stand corrected on that issue.
Lets assume they are not making any moves to save costs.

Is there a reason their costs have increased by more than say 3%-4% wage inflation and perhaps a 1% increase in NI (not sure whether the recent rise applied to employers contributions).
As I have said I would not have a problem with this kind of rise as clearly we all have rising costs all of the time.

I am aware that there is work involved (most of which is low paid).
No-one has yet given a decent justification for increasing the costs by 50% from what it was before.

MarkyMarkD

I agree - I've not attempted to do so. I was uncertain about the argument for it being anything to do with costs, but your post of the Ts & Cs certainly helps in that regard - thanks!

Assuming your line breaks match the original document, the bit in "(m)" relating the charge to the costs wouldn't seem to relate to the bits in (f) and (g) which are specifically relevant to redemption of a mortgage. That said, the whole section talks about "all costs and expenses which we incur".

I think, honestly, that the wording in (m) is meant to relate to non-foreseeable costs, and that the general principle is that services which are included in the set scale of charges (which redemption related costs have been for many, many years) are able to be varied at the lender's discretion.

Our first A&L mortgage was taken out in 1997 and the scale charges listing says specifically that the charges therein can be varied whenever A&L want - and there's no reference to this being restricted to RPI or any such concept.

lisyloo

We'll have to see how we get on.
My predication is as follows.

A lot of people wil complain.
The ombudsman will take one as a test case and give a partial refund.
This will be applied to all similar cases.
Only people who complain will get money back.
The lenders will carry on as they are as that's most cost effective.

MarkyMarkD

I think that's possible.

Equally possible:

A lot of people wil complain.
The ombudsman will take one as a test case and allow the charge to stand.
This will be applied to all similar cases.
Nobody will get money back.
The lenders will carry on as they are as that's most cost effective.

lisyloo

Do you wanna bet?
How about loser gives £20 to charity?

We might need to be a bit more specific about the terms though e.g. there might be a decision that's in favour of some lenders and not others.

I am willing to bet that the ombudsman will rule that £295 is too high.
If I lose I'm happy that a good cause will benefit.

Whaddaya say?

Fairdo_2

Lisyloo

"Fairdo - Do you still think this is so totally wooly that they can charge what they like? I don't. I think they have pegged it to tangeable costs which are not rocket science to estimate."

You are right. I would interpret that differently, as I would assume that this specifies the Hard Tangible costs as MarkyMarkD stated, whereas there would normally be something in the T&Cs stating something that implies they have discretion or the ability to vary the charges at any point in the future, or both.

Probably the most pertinent point on your quote of your T&Cs is the "Examples of our expenses include all costs and expenses which we incur"

This I'm afraid is just stating examples of their expenses and costs, not the possible charges they could pass on to you the customer.

Therefore, I stand by my original point about them being wooly.

I have lost the point to the original argument now. Mainly because I was not aiming to argue anyway!

I am totally on your side about the costs and how fair they are, but I was trying to state it from the outside looking in, so that both sides could be clarified.

I am not standing up for the lenders, but highlighting in my cynisism, that we have little say in the matter.

I am afraid, I have a slightly different view of your expected outcomes:

A lot of people will moan about it.
Not a lot of people will complain.
The ombudsman may take one as a test case and may give a partial refund.
Only people who complain will get some money back as a gesture of goodwill.
The lenders will carry on as they are as that's most cost effective.

As for a wager for outcome, I am but a humble Mortgage Adviser with a very large mortgage and 3 children, so I couldn't afford to place a risk of £20 in case I am wrong. As I have been known to be wrong at times in the past. (Gasp!!!!)

I would say to kick up a stink like an earlier poster did and you may get some of your money back and by all means, keep this topic alive and in the public, as this will increase the odds of proving me wrong by getting more people to act on their displeasure.

Good luck.