Mortgage lenders welcome FSA statement on MEAFs

The Council of Mortgage Lenders welcomes today's statement from the Financial Services Authority setting out its views on how it expects mortgage lenders to administer mortgage exit administration fees (MEAFs).

The CML has worked with the FSA on the statement, which now gives both consumers and lenders a clear picture of the FSA's expectations, and a practical menu of options for the treatment of borrowers.

Essentially, lenders have to choose by 28 February whether to:

charge no fee;
charge the original fee;
charge a revised fee; or
charge their current increased fee.

The CML sees this approach as helpful, in that it gives a consistent framework for the whole industry to use, while still allowing lenders flexibility to choose their approach depending on their own individual circumstances and contractual terms.

The CML emphasises (and the FSA accepts) that varying fees is not necessarily wrong. However, consumer reaction to recent rises in MEAFs demonstrates how important it is that fees and charges are transparent upfront, and that consumers are made aware of the basis on which they may change.

Michael Coogan, CML Director General, observes: "We welcome the FSA statement as a practical way forward. Transparency in fees and charges is unequivocally a good thing in terms of ensuring that consumers understand what they will need to pay at various stages.

"Lenders will ensure that in future their exit fees, and the terms on which they may be varied, are absolutely clear to borrowers upfront. But, in the UK market, where competition is tight and price competition is already fierce, the effect is unlikely to have a dramatic impact on the overall cost of a mortgage."