Mortgage lenders decide not to keep higher fees
Faced with a deadline of 28 February for justifying higher exit fees from mortgages, most mortgage lenders have apparently decided not to maintain their higher charges. The Financial Services Authority (FSA) told the lenders in January that if they could not show why they should charge higher exit fees by the end of February, they would have to either maintain their original fees or charge no fees at all. As of the Wednesday deadline, the FSA said that none of the lenders had chosen to maintain the higher fees.
The FSA has been looking into the issue of higher exit fees since 2005, when many lenders were seen to be raising the amount they charged to pay off a mortgage. Often the fees actually being charged, which are meant to cover routine paperwork and the closing of the account, were higher than those cited in the borrowers’ mortgage agreements. In many cases, the fees were double what the borrowers had expected to pay.
The FSA looked into the fee increases and decided that they could well be unfair, especially if the original agreements did not allow the lenders to up the fees. It also said that the charges could only be justified if they covered actual cost increases for doing the work.
In some cases, borrowers who were charged the increases fees will be able to get some of that money back from their lenders. One mortgage expert said that the total in refunds could be as high as £100 million, and Northern Rock (LSE: NRK) alone has put aside £15 million to pay back the overcharges. Borrowers looking for refunds must keep in mind, however, that they will likely need their original paperwork to prove that they were charged too much when they paid off their mortgage.