Money Magic

Despite more rigid enforcement against the practice by industry monitors, some mortgage providers are still assessing an exit fee against borrowers who change lenders. 

Online search engine mform.co.uk, a mortgage website which provides information to help borrowers make better decisions has done research which shows that, despite efforts in August by the Financial Services Authority to make the process clearer, borrowers still pay an average fee of £150 when they change lenders. 

Some major lenders, including the Royal Bank of Scotland Group companies, Standard Life Bank, Cheltenham & Gloucester, and Lloyds TSB have dropped the fee, but most firms continue to charge in excess of £100. 

The FSA has ruled that customers who are charged a higher fee than what is set out in the terms of their loan documents can reclaim the fee. The agency has urged lenders to make borrowers more aware of the terms of their loan agreements. 

The report by mform suggests that some lenders are not including information about the fees in their online information.

The FSA’s actions seem to be curbing rising redemption charges. Some lenders are putting an end to the fees altogether, according to Francis Ghiloni of mform. 

He believes that borrowers are beginning to understand the fees do not cover administrative costs involved in completing a loan; rather, they are part of the price of doing business with the mortgage bank. For that reason, the fees should be imposed at the front end of the loan, rather than at the end. 

Ghiloni warns borrowers to consider the impact of going from lender to lender, as application fees, exit fees and other costs add to the cost of the loan.

This entry was posted on Monday, December 17th, 2007 at 4:56 pm and is filed under Debt. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.