C&G scraps mortgage exit fee

Lisa Taylor, analyst at Moneyfacts.co.uk, comments: “With the deadline looming for lenders to report back to the FSA on exit fees, Cheltenham & Gloucester, the fourth largest mortgage lender has announced, with immediate effect that it will be removing its exit fee charge on all new mortgages.

“C&Gs fee of £225 was in line with the average of the market, but as the table below highlights it has shown a steady increase over the last 10 years increasing almost six fold from £40 in 1997.

“Latest Moneyfacts.co.uk research reveals that C&G join only HSBC, ING Direct and Stafford Railway BS in not charging an exit fee. This could be the start of things to come.

“On the face of it, its great news that lenders are taking the FSA enquiry seriously. And its only right that borrowers should not be faced with unknown fees, or charged amounts that bear little relation to the cost actually involved.

“But, should more lenders scrap exit fees or at the very least fix them from point of application, the lenders will be losing revenue as a result. And from past experience in other markets, when providers are shoehorned into a decision, where revenue is hit as a result, they will be sure to look for other avenues to recoup this income. Will arrangement fees be increased further, rates upped by a fraction or other rates and fees tweaked? But there’s a good chance lenders will take some form of action to recover this fee income.”