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Leading mortgage lender announces mortgage exit fees will be scrapped

A number of major lenders in the UK have recently announced that they have scrapped mortgage exit fees, which are charged to borrowers when they repay a mortgage or when they close a mortgage account to switch to another lender.

Over recent months UK regulators and campaigners have highlighted the fact that a number of menders have increased their mortgage exit fees by huge amounts over the past few years, with some going up by as much as 100% or 200% just so that the lender can make extra profit.

Following pressure from regulators over these fees, and the fact that consumers are now being urged to reclaim the mortgage exit fee that they were charged, various lenders have announced their decision to scrap the fees, and the latest to make an announcement stating that the fees is to be scrapped it Britain's larges mortgage lender, the Halifax. The announcement came on the day of the deadline that the Financial Services Authority had set for lenders to inform the agency of what they were going to do about their mortgage exit fees.

Many consumers have filed claims to reclaim the different in the amount of the mortgage exit fee they were charged compared to the amount that was quoted when they took out the loan, which in some cases means a considerable difference because of the level at which some lenders have increased their mortgage exit fees over a relatively short period of time. However, experts are stating that some lenders may now hike up the cost of set up fees on mortgages in order to try and recoup the losses that result from the scrapping of mortgage exit fees.

One industry official stated: 'With the actual cost of administering the exit of a mortgage deal estimated to be substantially lower than the fee charged by the lender, the vast proportion of the exit fee is profit. And, like any other profit making organisation, the lenders are unlikely to surrender this revenue stream without a fight.'

Tom Smith
13th August 2007

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