Homeowners Set To Receive £200 Million Compensation Over Mortgage Exit Fees


by Tosif Patel - Date: 2007-01-28 - Word Count: 417 Share This!

While many regulators go unnoticed and simply rubber stamp approvals, etc, the life of a financial regulator is far from easy. While the mortgage industry has been the subject of various Office of Fair Trading investigations, the next investigation never seems to be too far away.

The latest element of mortgages to be criticised are exit fees - and the sudden and dramatic rise over the last two years. It was only recently that the regulator criticised the size of set-up fees, and forced a major industry re-think. Now it appears that the reduced set-up fees have merely been added to the exit fees.

The Financial Services Authority (FSA) only yesterday publicly criticised mortgage lenders for the increase in exit fees and ordered lenders who have imposed unfair fees to reimburse the difference between the original and new fees, to the customers in question. The regulators investigation has shown that the average exit fee has risen some 33% over the last two years, with some fees now in the region of £295. Set against the actual cost of £65 (as confirmed by one lender) you can see the scope for "over charge".

The FSA have now advised all customers who have paid an exit fee since 1995 to contact their provider to demand an immediate refund. Such is the extent of potential compensation payments that companies such as Northern Rock have ear marked a cool £15 million for compensation payments. While Northern Rock have been very active in the mortgage market, they are by no means the largest, and the industry wide total is forecast to be in the region of £200 million.

This is a prime example of headline interest rates (of which many are only short term) masking the additional costs of the mortgage of today. So desperate are lenders to retain your customer that they have attempted to put up as many obstacles as possible should you consider leaving. While the industry continues to look at other ways of increasing revenue from mortgage agreements, the suspicion of the homeowner will increase, although the belated assistance from the regulator is always welcome.

While some mortgage lenders may decide to ignore the recent "advice" and try to justify their increased exit fees, the FSA have threatened legal action (with its negative publicity) against any "unjustifiable" fees.

Even in the boom times the mortgage industry seems to attract bad press comment, although with last months mortgage approvals falling to their lowest level for 6 years, the boom times may not last for much longer.


Related Tags: mortgage, compensation, homeowners, exit fees

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