Mortgage brokers are calling on trade bodies and the FSA to open up a debate on what level of exit fee is reasonable.
Only two out of the top 20 mortgage lenders have confirmed that they will be scrapping exit fees for new customers despite the FSA’s July 31 deadline for lenders to “review” their charges.
Cheltenham & Gloucester and Bristol & West join HSBC, ING Direct and Stafford Railway Building Society in not charging an exit fee.
Brentchase Financial Services mortgage specialist Mike Fitzgerald believes the Council of Mortgage Lenders and the Association of Mortgage Intermediaries should come up with a way of forcing lenders to charge reasonable fees.
Fitzgerald says: “It is disgraceful how high some of these charges are, such as £295. That is just not right. I think we have got still got a long way to go to make it transparent.”
He says a charge of about £50 would be more reasonable and cover lender’s costs.
Although the FSA has made it clear that it does not set prices for the products it regulates, it says lenders should ensure that the exit fee represents the true costs of the lender’s admin services.
Nationwide charges the lowest fee at £90 but the pressure is on lenders such as Alliance & Leicester and Woolwich, which charge more than £250, to justify their charges.
Seven of the top 20 lenders have no plans to change their current fee pricing. A large majority of lenders, including major players such as Halifax, Abbey and Northern Rock, are still undecided despite the looming deadline.
The Mortgage Practitioner sole practitioner Danny Lovey says: “We have to keep banging on about this. We cannot let lenders off the hook. The real cost is about £35 – not £250 or however much lenders are charging.”