Do We Have To Pay Mortgage Exit Fees?

One Fool catches up on the latest news about exit fees, and spends some time sifting fact from fiction.

Coming up with original ideas and opinions is one of the best bits of my job, but I must admit that recently I've not been following the mortgage exit fees situation closely enough to do that.

Therefore, on this one occasion, I'm going to resort to being an uncommon hack by giving you a round-up of the news on exit fees from two or three sources.

(A common hack wouldn't tell you that he was stealing from other writers, he'd just do it. Quite possibly from me. Again. One day I'll get around to writing My 10 Top Stories Stolen By Hacks!)

Major lenders scrap mortgage exit fees

...Says Hilary Osborne of the Guardian. She reported yesterday that '95% of the industry, including all the major high street lenders, had opted to either scrap the fee, reduce it or revert to the original fee.'

Halifax, Cheltenham & Gloucester, Northern Rock, the Royal Bank of Scotland and NatWest have opted to scrap the fees completely, while Coventry Building Society has reduced it, she added.

Watchdog to 'monitor' re-named exit fees

...Claims Grainne Gilmore of The Times Online. She wrote that 'lenders who had simply changed the name of their exit fees would...come under scrutiny' by the Financial Services Authority. The watchdog, she says, told her 'The principles we have set down for exit fees apply to other charges and the terms of these charges need to be made clear to customers.'

Gilmore reported that Abbey, Bradford & Bingley, and Bristol & West have withdrawn their exit fees, but introduced new charges of the same amount. They've effectively been renamed as 'mortgage account fees', 'general administration fees' and 'core term fees', respectively. Bristol & West's core term fees can be paid at the start or end of the mortgage.

Big UK mortgage lenders defy regulator over higher exit fees

...Say Sharlene Goff and Jane Croft of the Financial Times. 'Barclays and Alliance & Leicester are among the banks that will continue to charge borrowers as much as £295 for repaying their mortgage early.'

They add 'Mortgage brokers believe that the banks that have kept higher fees could come under pressure to cut them over the next few weeks, as they would not have anticipated that other lenders would eliminate the charges completely.'

Ugh, I just can't do it. I have to write my own views. Let's earn my living now with some original research and commentary...

Who interprets the law?

Having read most of the news reports, I just called the FSA to get clarification on some points that didn't add up. After that conversation, I'm glad I gave up on my poor attempt at hackery.

At least one news source, through some interesting word-play, implied that the FSA has made it possible for us to refuse to pay exit fees unless our lenders justify their charges.

The FSA has done no such thing, and nor should it. One area that is often misunderstood is the FSA's responsibilities. The FSA doesn't, for example, rule on consumer contract law. It might state its opinion, but it, like the Office of Fair Trading and the Financial Ombudsman Service, doesn't ultimately interpret the law. The courts alone do that.

So, giving up on the media entirely now, here are some more thoughts:

Has the FSA done its duty?

Thanks to the FSA, many lenders have reduced their exit fees to the level they were at when we took out our mortgages. Others have abolished them completely.

As far as the FSA's statutory objectives (meaning, what it exists for) are concerned, I think it can reasonably argue that it has done its job. The rest is up to us...

Our reclaim guidance is still the same

If your lender charges you a mortgage exit administration fee (even if its under a different name), you should read our guidance in The Fool's Guide To Reclaiming Mortgage Fees to get our view on whether it's worth claiming. You may also want to take a look at the encouraging results of our poll of other exit-fee claimants.

Be ever wary of the small print

Lenders will make up these fees elsewhere, but it's the unwary who are likely to suffer the most. If your lender adds an extra charge to your mortgage at the start, for example, you could end up paying a lot more, because you'll also pay interest on it for the length of the mortgage. Over ten years, an extra fee of £200 added at the start of your mortgage might cost you an additional £100 or £150 in interest.

Sadly, I forgot to ask the FSA spokesperson if he's signed our petition. And on that note, no, I'm not going soft on the FSA: we are still right to petition it to rescind its waiver to banks on penalty charges.

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> Before claiming, take the time to read posts on our Reclaim Unfair Mortgage Fees discussion board, to see how successful claimants have done it.