Over recent months mortgage exit fees have been at the centre of controversy, with regulators and campaigners questioning why a number of lenders have hiked up the cost of mortgage exit fees by huge amounts – in some cases by 200% over the past few years. Mortgage exit fees have been charged to those closing their mortgage accounts, such as those that have paid off their mortgages and those deciding to remortgage with another lender.
Following a review of mortgage exit fees financial regulators in the UK have been putting pressure on lenders to explain why these fees have rocketed to such an extent, and consumers have been urged to contact mortgage companies to reclaim some of the mortgage exit fee that they were charged. It seems that many lenders have now decided to bow to the pressure from regulators, with announcements that they plan to scrap mortgage exit fees altogether.
The leading mortgage lender in Britain, the Halifax, has recently announced its plans to get rid of mortgage exit fees. Regulators have stated that lenders are charging way more than they were several years ago, and yet there is nothing in the small print to state that they can up the fees in this way, which is why consumers have been urged to try and reclaim these fees. However, the concern amongst campaigners and experts is that the loss in profits will now have to be made up elsewhere, and this is likely to be through increased set up and arrangement fees.
One industry professional 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.’
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