Our previous article about the hidden costs of arranging mortgages showed how banks and building societies are increasing arrangement fees and other charges to boost their profits, yet offer attractive interest rates in the highly competitive mortgage market.
Well the borrower has now to consider yet another increase in the costs of mortgages – lenders are raising the costs of mortgage exit fees. These are the fees charged when you move your mortgage, or pay it off entirely.
More people are switching their mortgages
With the recent rises in interest rates, and the fact that many people are coming to the end of their fixed rate mortgage term, now is a good time to look at the market to find the best mortgage deals.
Switching your mortgage to a more competitive rate, possibly with a fixed rate deal before interest rates rise further, can save you considerable amounts of money.
The banks can see that an increasing number of people are switching mortgages and have found a new way to benefit from this – by significantly raising the cost of their mortgage exit fees.
Mortgage exit fees
There is some justification in a bank charging mortgage exit fees, as this is meant to cover their administration costs in closing a mortgage account.
When exit fees were around £50, they seemed reasonable and justifiable, however in recent months they have increased to about £300 in some cases. This is pure profiteering by the lenders.
Some lenders, such as Nationwide, still charge a reasonable £90, however Northern Rock has increased its charges to £250, yet one imagines that the work involved in closing a mortgage account is similar for both lenders.
The FSA has investigated the rise in mortgage exit fees and is forcing lenders to refund people who have been charged more for their exit fee than was stated in their original mortgage terms.
The FSA is also enforcing banks and building societies to change their policies on mortgage exit fees so that they are brought more into line with justifiable administration costs, or removed altogether.
Claiming a mortgage exit fee refund is easy
If your bank or building society has increased its mortgage exit fees beyond those stated when you took out the mortgage, you can make a claim against your lender to refund the difference.
Even if you no longer have your original mortgage documentation, you can still make a claim by phoning your lender and explaining why you should receive a refund.
As long as you can justify why you should receive a refund – and a difference between the current charge and that stated when you took out the mortgage is more than justifiable – you should receive the refund without question.
Some lenders are avoiding bad publicity by refunding not only the difference, but the entire fee, so it pays to be vigilant and approach your lender if you have a valid claim.