Mortgage companies complying with FSA demands on exit fees
The Financial Services Authority has recently announced that all mortgage companies and lenders so far seem to be complying with the regulator's demands to reduce exit fees charged to consumers that are closing down their mortgage.
In 2005 the Financial Services Authority started an investigation into the extortionate fees that were being charged by many mortgage lenders when a customer closed down the mortgage – way higher than the fee that had been outlined when the customer took out the original contract.
Following the investigation, which was concluded earlier this year, the FSA stated that lenders would have to either justify the exit fees that were being charged to the regulator’s satisfaction or would have to reduce the exit fees. According to officials from the FSA no lender has yet decided to stick to and justify the higher exit fees being charged.
One spokesperson from the FSA stated: "Certainly the impression we are getting as we go through the responses is that most lenders have gone for the original mortgage exit administration fee option."
Over recent years a number of mortgage lenders have doubled their exit fees to between £200 and £300. However, the only fees that should be charged should relate to the cost of the administrative processes relating to the mortgage exit.
The fees that some lenders have been charging, however, have been far higher than this. It is thought that many people that have closed mortgages over recent years will now be able to claim back a proportion of the money that they paid for the mortgage exit fee.
A spokesman from the
mortgage broker John Charcol stated: "Around 10 million mortgages have been redeemed in the last four years. But the number of people who claim compensation will no doubt be largely influenced by the amount of media coverage this topic receives. However, I would estimate that the total compensation payable will be at least £50m and probably in the region of £100m."
Tom Smith
14th March 2007
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