Lenders to fall in line on exit fees

Commenting on the FSA’s mortgage exit fees announcement Louise Cuming, head of mortgages at moneysupermarket.com said: “Since the FSA called for more transparency on exit fees back in June, lenders have failed to respond. Indeed, the only real movement within the existing market to date has been to increase these charges.

Today, the FSA has set lenders a deadline of 28 February to make their exit fee charging structures clear to borrowers.

“However, if lenders opt for the latter two outcomes1, thousands of borrowers could still be subjected to unfair treatment when entering into a mortgage contract because the FSA still allows lenders the license to raise the charges without consulting the borrower. Even with all the justification in the world, it still means people can face a nasty surprise when they decide to terminate their mortgage contract.

“Indeed, despite the fact lenders have been expecting this guidance from the FSA since its June announcement they have still managed to increase fees during this time, with Standard Life and Britannia Building Society both culprits.* Indeed, in spite of the announcement’s imminence, Britannia has even managed to sneak in an extra rise since December 2006. The Building Society raised it exit fees from £75 to £110 in January 2007. Hopefully lenders will now fall into line and either choose to charge no exit fees or charge the original exit fee – effectively they are being forced to ‘guarantee’ their exit fees which is welcome news.

“However, the fourth and final outcome proposed by the FSA, which allows lenders to increase current fee levels, is ludicrous. Deeds are no longer a legal requirement and the majority of the administration involved is now conducted online and therefore the current level of fees – ranging between £90 and £295 – already seems extortionate. I believe all exit fees should be reduced to reflect accurately the cost of the administration work involved.”