Mortgage Redemption fees increase
As a large number of mortgage lenders have increased the cost of paying off mortgages, switching lenders has become even more expensive.
Research by Moneyfacts has found that redemption fees have risen by 100 per cent at some lenders in the last year. Due to these exorbitant fees, Moneyfacts and other experts are advising consumers to be cautious and diligent with regards to redemption fees.
“If you are only looking at keeping your mortgage with the same provider for a couple of years, a £295 exit fee certainly needs to be taken into account when shopping around,” said Darren Cook, head of mortgages at Moneyfacts.
Many UK credit card, mortgage and loan providers are now trying to recoup losses and boost profits by raising “small print charges" especially as their respective markets are as competitive as ever. The mortgage market in particular ahs become more competitive, which has led to lenders profit margins being eroded. These charges also deter customers from switching lenders.
Over the last year, 53 providers have increased their redemption penalty, with 23 of those raising them by more than 100 per cent. However, not all lenders have gone down this road and the best advice is to look carefully at your redemption fee when you are considering switching mortgages.
“With 42 providers having an extra fee of less than £100 and 16 with no fee at all, it is worth weighing up the impact of these lower fees, not just the interest rate,” Mr Cook concluded. It is also worth noting that redemption fees are also known as discharge fees, deed fees, exit fees and sealing fees. They are administration charges levied when borrowers repay mortgages or move from their existing lender.
Those looking either for their first mortgage or a new one, should take these fees into account when shopping around and make a point of asking their mortgage adviser more about redemption fees. However, it is not just new applicants that these charge increases affect, as they apply to existing customers also. This in effect means that your lender can increase your redemption charge during the lifetime of the policy.
As with UK credit card issuers, some mortgage lenders have become victims of their own deals as they try to tempt consumers to buy their policies and as a result are having to look at new ways to recoup their losses.
30/4/05
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