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The majority of lenders have agreed to charge borrowers the original mortgage exit administration fee (MEAF) they signed up to after Wednesday’s Financial Services Authority (FSA) deadline on exit fees passed.
MEAFs have been subject to significant rises over the past few years. The FSA investigated and told lenders they had to either: charge no exit fee, charge the original fee, or justify the raises. They had until the end of February to write to the watchdog and state their intentions.
A spokesman for the FSA said they were still collating the information but that "overwhelmingly" lenders were opting to charge the original MEAF. The lenders will have to refund the difference between fees for those who have paid off their mortgages in the last few years if they make a claim.
Some, such as Northern Rock, have already made large balance sheet provisions to do this.
However, not many lenders have taken the opportunity to reduce their current exit fees. Skipton has announced a cut from £175 to £125 but the expected rush of competitive pricing did not generally materialise.
Meanwhile, Kensington Mortgages has stuck its head above the parapet and announced that it will keep its fee and will not be refunding customers. A spokesman said it was confident its processes are fair and reflect costs. It said to refund or change position would be to admit that it has unfairly raised its fees. Kensington’s rise is relatively small: at £145 it has only gone up by £20 since 2005 and by only £45 since 1998."
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The Times online
March 1 2007
Mortgage lenders to pay back millions in exit fees Gráinne Gilmore
Mortgage lenders will repay tens of millions of pounds paid by homeowners in “unfair” mortgage exit fees.
Most banks and building societies said yesterday that they would compensate millions of borrowers over exit fees, levied when they moved to a rival lender. They announced their decision in response to a challenge from the Financial Services Authority, which gave them until yesterday to either charge the original exit fees that customers signed up for, or to justify the new, higher fees.
Melanie Bien, of Savills Private Finance, the mortgage broker, said: “Anyone who has remortgaged in the past few years – and that is a lot of people – will be able to make a claim, depending on their lender’s stance. Lenders are concerned about the scale of claims they are likely to see regarding exit fees, which may be why borrowers will have to make a claim themselves, rather than wait to be contacted by their former lender.”
Some mortgage lenders have more than doubled their exit fees since 2003 and the highest charge is £295. Customers who were forced to pay higher fees than they had agreed to when taking out their mortgage deal are eligible for a refund. Background How to reclaim mortgage exit fees How to claim back your penalty charges
For example, a borrower who signed up for a three-year mortgage deal with Abbey in 2003 will have agreed to pay an exit fee of £99. But when they redeemed the mortgage last year, they would have been charged £225, as the lender increased its fee in May 2005. This customer could reclaim £126 from Abbey.
Kensington, a sub-prime lender, was last night the only home loan provider to refuse to refund inflated exit fees. Northern Rock, the fifth-biggest lender, said this year that it had set aside £15 million to cover the cost of refunding mortgage customers. But Halifax, which published its annual results yesterday, made no provision for the cost of refunding customers, despite having the largest share of the market.
The watchdog’s demands came as a blow to banks, which are being deluged with demands from customers seeking refunds for “illegal” overdraft charges, some of which are as high as £39.
Some experts said that this could cost the banking industry billions of pounds. The Office of Fair Trading is investigating the charges and is expected to announce its findings later this month. Last year the OFT ordered banks to reduce penalty charges on credit cards.
Most lenders refused to budge on their exit fees after the FSA announced its investigation. Only two lenders said that they were cutting their charges. Portman Building Society cut its fee from £199 to £145 last month, while Skipton Building Society will cut its fee from £175 to £125 from April 1. Other lenders said that their fees were under review.
Ray Boulger, of John Charcol, said: “The big plus from the FSA report is that it has made things a lot more transparent.” The fightback gathers strength
Cost of the customer campaigns – Exit fees are the latest in a sustained consumer backlash against financial institutions
– Last year the OFT capped credit card penalty charges at £12, limiting a lucrative source of income for the issuing companies – Customers have also been displaying their displeasure at bank charges for going into the red without permission
– Consumer bodies have encouraged them to reclaim these charges and banks have been paying up before the cases reach court or the Financial Ombudsman
– More than a million template letters to help people to reclaim overdraft charges have been downloaded from one consumer website. The OFT will rule on overdraft charges this month Have your say Have your say
Just shows how fluid is the mortgage system!!!!
Firozali A.Mulla MBA PhD, Dar-Es-Salaam, Tanzania
I was on an Interest only mortage for one year with The One
Mortgage exit Admin fee - article Credit Today
exit fees - 02/03/2007
Thank you.
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