Some of the UKs biggest banks, including "Halifax", "RBS" and "Lloyds TSB", have decided to scrap the mortgage exit fees charged to borrowers repaying their loan. Pressure had been mounting on the lenders to take action over the spiralling charges, following a significant volume of negative press over the issue and investigations by the governing body, the Financial Service Authority.
Many lenders had significantly increased their exit fees over the last few years, as a way of maintaining profit levels in an ever increasingly competitive market. Alliance & Leicester, as an example, increased their fee from £150 in 2002 to £295 by 2006. This represents an increase of almost 100%, although there was nothing to suggest that the lender themselves had realised an increase in the amount of work being carried out to administer the closing of a mortgage account.
Even if the customers loan agreement had only stated a fee in the region of £50-£100 when taking the loan out, lenders were applying the new, increased charge at the time of closing the account. This practice was outlawed by the Financial Services Authority, who gave mortgage lenders until February of this year to either stick to the original fee quoted to the customer or drop it altogether. With most lenders agreeing to stick to the original fee quoted, the floodgates were opened to millions of customers who had been overcharged in the last few years. Many borrowers sought advice from websites such as www.consumeractiongroup.co.uk to help recoup the fee they had paid.
Whilst nobody has exact figures of the amount paid out by lenders in refunding exit fees, a Financial Services Authority spokesman has estimated at a figure of “hundreds of millions”.
Of course, borrowers will now have to be wary of how lenders choose to plug this potential profits gap. Many lenders have recently increased arrangement fees charged at the inception of a mortgage, with initial fees being quoted as a percentage of the loan amount becoming common practice. The UKs largest mortgage lender, Halifax, has just introduced this fee structure within the most recent range of fixed rate products.
So, perhaps now more than ever, borrowers would be advised to look more closely at the small print signing up to a new mortgage. Shopping wisely will be the name of the game, with more consumers turning to mortgage brokers, especially where no fee is charged for the advice offered.
Source: http://www.ArticlePros.com/author.php?Paul Cake...
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