Maybe there are some banks out there that listen after all. Last week one of Britain’s biggest mortgage lender, Cheltenham & Gloucester, announced that it was to remove its £225 exit charge on all newly taken-out mortgages.
Exits fees are those charged when mortgages are paid off before their full term has expired - usually when homebuyers remortgage or pay off loans before the full, typically 25-year term. These exit fees should not be confused with an early redemption charge, which borrowers almost always have to pay if they quit a loan halfway through.
Prior to C&G’s announcement Which? magazine had highlighted that some banks were charging four times as much as was originally agreed to redeem a mortgage loan. Some banks were telling customers to pay £295 to be able to switch to another lender. One bank’s exit fee had increased from £50 to £225 in the last five years – a 350% increase. Homeowners trying to close down an existing mortgage, and being met with surprisingly high charges were encouraged to find their original paperwork and make sure the current charges matched those stated in the original agreement.
C&G’s exit charge was £40 in 1997 and is £225 for some existing mortgages now. The Financial Services Authority announced a clampdown earlier this year, advising lenders to charge only the originally quoted fee, or charge no fee at all. HSBC, ING Direct and Stafford Railway Building Society are now joined by C&G as a small band of lenders not charging an exit fee. It is hoped other lenders will now follow suit. Currently Alliance & Leicester charges £295 and Woolwich/Barclays has an exit fee of £275.
Homeowners are advised to pay only the amount in the original documentation, and not an increased fee. Anyone who has already paid over the odds can reclaim the difference up to six years afterwards.
Leave a Reply