Mortgage exit fees under scrutiny

13 May 2006
The massive increase in mortgage exit fees has been placed under scrutiny by a new investigation.

Reporters found that lenders had increased fees by as much as 4,000 per cent in just 15 years, amidst claims that they are an unfair penalty rather than true reflection of costs.

In the BBC News investigation, an aggrieved mortgage-holder complained that his exit fee had risen from £7.50 to £295 since 1991. Reporters found that all 18 of the country's biggest lenders had either hiked or introduced exit fees since 2000.

Complaints that lenders are introducing an "unfair penalty" comes as the Office of Fair Trading orders banks to reduce overdraft fees that are deemed unfair.

Many would like to see similar action by the Financial Services Authority (FSA), but it told the reporters that it is not in their remit to cap fees, but recommends a fee of £200.

Providers claim that it is to cover administration, though critics point out that costs should actually be reduced now that the Land Registry deals with deeds.

Though the FSA may not be taking action, the Daily Mail claimed last month that its campaign against the spiking of fees had led the Leeds Building Society to reduce its increase.

The higher charges are likely to have come about due to the increasing competitiveness of the mortgage market, which has seen holders switch lenders more than ever before.

Story 3: To read more about mortgages, click here.

track© Adfero Ltd