Reclaim Fees

Which? September 2007

Have you been stung by high fees at the end of your mortgage contract? Challenge your mortgage lender.

Mortgage Exit Administration Fees (MEAFs) are the fees paid by borrowers to exit their mortgage contract, for example when switching at the end of a fixed interest rate period, or when the mortgage is paid off. They are intended to cover the costs of things like releasing the deeds to your house.

Fees to exit your mortgage should be proportionate to the real admin costs.

This is a different charge to an early redemption penalty, where you have to pay a charge if you want to leave your mortgage before the end of the contract.

Unexpected increases
Some lenders have been increasing exit fees on existing mortgages. This means you may be charged more when you exit the mortgage than it showed in the contract at the time you signed it.

The Financial Services Authority (FSA) concluded in June 06 that some lenders might have increased their fees unjustifiably. It then launched an investigation into the increases of MEAFs and whether they complied with the Unfair Terms in Consumer Contracts Regulations 1999 (UTCC).

Fair fees
The FSA has said that mortgage lenders should charge customers either no fee, or the original fee in the contract. If they want to charge a higher fee, they need to justify it.

Deed release fees, land registry charges, staff processing costs and a reasonable proportion of general overheads can all be included in an increase in fee, but the FSA has been clear that other costs, such as marketing, loss of profit on lending or costs of arranging or running the mortgage cannot.

Challenge your lender
If you’ve paid a fee in the last six years that was higher than the original fee in your mortgage contract, we think you should challenge your mortgage lender.

As with unfair bank charges, we also believe that if the fee was disproportionate to the real costs of administration of the exit from the mortgage then you should challenge it, even if it had not risen since the original contract.