FSA update on mortgage exit fees |
The Financial Services Authority (FSA) have been investigating exit fees on mortgages, or Mortgage Exit Administration Fees ("MEAFs"), since September 2005. It has been looking at whether the recent increase in the level of the fees charged by some lenders are fair to consumers.
The fee is labeled as covering costs such as changing name on the registration of the property at the Land Registry, but many think that lenders are increasing them disproportionately so they can recoup money 'lost' by offering extremely cheap mortgage deals to new customers.
Many mortgage contracts will state that the lender may increase the exit fee during the life of the mortgage, however, this means that the variation must comply with the Unfair Terms in Consumer Contracts Regulations 1999. The FSA has stated that "a variation clause is less likely to be regarded as unfair if the variation can only be made with a 'valid reason' which is specified in the contract.".
With many lenders increasing their exit fees drastically in recent years, many may find it difficult to justify the increases as being 'fair'. For example, Cheltenham & Gloucested charged just £50 5 years ago, but now charge £225 - an increase of 350%.
This issue is exacerbated by the fact that since 2003 the Land Registry has kept deeds in an electronic form, actually reducing costs for lenders.
The FSA has given lenders that are under investigation a month to produce a response, providing evidence of why increases to MEAFs were made. They will report on the issue in the autumn.