Thu 30th Aug, 2007
Mortgage Exit Fees
Many consumers are unaware of their home loan exit fees. When asked, they rarely know how much they will be forced to pay for the privilege of closing their mortgage. Many do not know if this is a fixed rate, or if it will be reduced as they remain with their mortgage lender. In many cases, the closing fees are so high, it is impossible to switch mortgages to take advantage of lower rates, or lower monthly payments, offered by another lender.
Mortgage lenders recently agreed to fix mortgage exit fees or dispose of the unnecessary fee, according to Britain’s financial watchdog The Financial Services Authority (FSA).
The FSA asked lenders to stop increasing exit fees after a borrower signed up to a new cheap loan deal, a practice that forced some borrowers to pay higher charges than in the original agreement.
A few lenders did discontinue their closing fee policy, but the FSA believes that a most will continue to vary the fees, or bury them in other fees the client incurs when they repay a homeowner loan early.
Some are concerned that this will have the same effect as the unwarranted overdraft fees, resulting in thousands of homeowners requesting a refund on what they consider “unfair” exit fees.
Independent mortgage broker John Charcol said that 10 million mortgages are effected by “excessive” increases in exit fees four years ago. Homeowners may collectively be entitled to claim compensation up to 100 million pounds ($202 million) in total. This will be a hard blow on banks who are already reeling from record bad debts and refunds on excessive charging.