How To Get A Cash Refund If You Have Been Charged Mortgage Exit Fees
If you get beaten 2-0 in a game of football then that is a fair result. But if you get beaten because the opposing team has moved their goalposts, then hang on a minute…..
This is exactly what’s been happening with the banks and building societies concerning Mortgage Exit Fees.
What Is A Mortgage Exit Fee
A Mortgage Exit Fee is an administration fee for the paperwork involved when you settle a mortgage. For example, you might have a £100,000 mortgage with the ABC bank but after 6 years decide to move to the XYZ bank who offer a better deal.
But the trouble is when you signed up for the mortgage the terms and conditions stated something like ‘if you want to move this mortgage to a different bank we’ll levy a £50 admin charge’ – the so called Exit Fee.
That £50 fee looks perfectly reasonable. However what the lenders have done over the last few years is to increase the price of these exit fees, sometimes to as high as £300.
This in itself is not a problem for people taking out new mortgages (as the price would be clearly stated in the small print) but what’s unfair is when the fee is raised during the term of the mortgage – hence the moving of the goalposts.
When Were Fees Increased
Most mortgage exit fees were increased from 2004 onwards. So if you’ve moved or switched your mortgage after 2004 there’s a real chance you can get a refund. This means that around 4-5 million mortgage holders have the chance to reclaim money.
If you believe a refund is possible dig out your old paperwork, see a) how much you were actually charged, and b) what the exit fee was as written in your original contract.
If you haven’t got any paperwork then write to your old lender and ask them the amount of the exit fee when you left them PLUS what was the price of the original fee when you signed up for the mortgage.
How Much Should Exit Fees Be?
It is always difficult to put a one size fits all figure on administration costs but the financial research company Defaqto has estimated the costs to be no more than £35.
One of the reasons that these types of fees have skyrocketed is due to advertising competition. The lenders all try and compete on what they call ‘headline’ or ‘best buy’ deals where benefits such as a heavily discounted interest rate are shouted about as loud as possible.
But when the banks/building societies offer a gift with one hand they usually try and take something with the other. Hence, higher exit fees are one way they can claw back some lost profits.
What Cannot Be Claimed
Redemption penalties cannot be reclaimed. These are fees which are charged when you try to exit a mortgage offered on a special deal. For example, if you signed up for a a 2 or 5 year fix with a discounted interest rate and wanted to leave after only 1 year.
The Financial Regulator becomes Involved
It’s always easy to criticise the UK’s financial Regulator The Financial Services Authority, but this time they’ve been right on the lenders’ back and have published a review which generally agrees with consumers that the sharp rise in mortgage exit fees is unwarranted.
Hence, the majority of lenders are now refunding the fees to customers without a fight.
How To Proceed
Simple, copy and paste the following letter into your Word processor, changing the relevant addresses etc. We would advise you send it recorded delivery so the bank cannot deny having received it. If you haven’t heard anything back from them within 28 days write to them again enclosing the original letter. Basically keep on their case.
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ABC Bank
1 High Street
Anytown
ASD1 7BNM
1st Month 2007
Dear Sir
I am a former borrow of (bank/building Society). When I ended my mortgage I paid a mortgage exit fee and although at the time I did not complain I now believe that the fee was unfair because the fee had increased while I was still a client.
I am led to believe that any fee levied is supposed to reflect the administration cost involved in closing the mortgage. Recent research carried out by Defaqto puts this cost at £35.
I consider I am entitled to a refund of the difference between the fee I paid and the fee that appeared on my original agreement.
I look forward to your reply within 28 days. If you are unable to meet my request I would be grateful if you could send a deadlock letter, also within 28 days, so I can take the case to the Financial Ombudsman.
Yours faithfully
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When To Get The Financial Ombudsman Involved
The Financial Ombudsman is an independent service used for settling disputes between customers and financial services companies. If your bank balks at repaying you any money don’t waste too much time arguing with them, instead go to the FO’s website (see below) and fill in an online complaint. It’s very easy to do and there’s plenty of help on their website.
Summary
As we always try to say on this website, let’s not be too hypocritical and blame the banks for profiteering because chances are we’d do the same in their shoes or we wouldn’t be in business for very long.
Instead, understand that they’re always going to be trying to increase their charges, so it’s very important to keep an eye on them to ensure that their fees are in keeping with current law. If you find this not to be the case you must immediately ask for a refund.
In our experience the banks are pretty fair when customers complain (as long as they have a reasonable case) and are happy to pay out if only to give them an easier life. Banks know full well that the majority of their customers won’t complain and hence they’ll keep the money.
Good luck in reclaiming those mortgage exit fees.
Useful Links
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