Borrowers appear to have won the first phase of their battle with mortgage lenders over “unfair” exit fees.
The vast majority of current customers will now not be charged any more than their contract originally stated, with most of the major lenders signing up to that pledge.
But borrowers will still face a battle to receive compensation for being overcharged as only Abbey, Nationwide, Northern Rock, Yorkshire BS and Woolwich have promised a definite refund of the difference between the fee agreed and the fee later charged, with other lenders saying they will judge compensation claims on a case-by-case basis.
All of the providers to have replied so far to a Money Marketing survey of the top 20 lenders, other than Kensington, have promised customers and their brokers that they will charge the exit fee the client originally signed for.
Kensington is refusing to change its stance of forcing borrowers to pay its current fee even if their contract states a lower charge, though it applies one of the lower fees on the market at £145.
The lenders that charge an exit fee to have made the pledge are Abbey, Alliance & Leicester, Bradford & Bingley, Bristol & West, Coventry Building Society, HBOS, Lloyds TSB, Nationwide, Northern Rock, the Royal of Scotland group, Standard Life Bank, Yorkshire Building Society and Woolwich.
However, some brokers believe the lending community has not gone far enough and needs to slash fees to £50 at most, as exit fees are meant to reflect the cost of closing an account, with some surveys estimating that cost to be just £35. A&L’s £295 charge is the highest in the market.
The Mortgage Practitioner sole trader Danny Lovey says: “The battle is won but the war is not. The costs still do not reflect the administration so lenders cannot defend the indefensible.”
Lenders, who still have until July to decide their policy relating to future customers, had until close of business today to inform the Financial Services Authority of their stance on exit fees for existing customers after it said they must pick one of four options following its regulatory crackdown on firms that increase their charge during a contract term.
The options were to charge no exit fee, charge the original fee, charge a revised fee or charge their current increased fee, which has since been increased from the original contract.
The FSA said that lenders opting for the third or fourth option would have to justify their reasons, and suggested last year that lenders that raise their fee from that stated in a contract are acting so unfairly.