Following the market’s remortgaging trend and the need to remain competitive Ray Boulger, senior technical manager at John Charcol, expressed concern that the competitive start rates enticing borrowers are hiding the costs of arrangement and exit fees.
He said: “Over the last 12 to 18 months there has been a marked increase. In some cases companies have increased their exit fees by over 100 per cent. Arrangement fees are less of an issue as they are clear and the borrower knows what they are paying, whereas exit fees are often changed surreptitiously.”
Boulger said the increased fees are down to the fact that as the average life of a mortgage has fallen the lenders see the fees as a way of recouping costs, although it’s hard to justify the increases that lenders are making, especially as costs may actually be going down.
“Lenders now no longer have to hold deeds as they are stored electronically and this in itself means that less money is being spent. Therefore it’s even more ironic that as costs are decreasing, certain fees are increasing.”
Boulger went on to add: “Although exit fees are high, progress made by Northern Rock, who has the second largest exit fee behind Alliance & Leicester, should be welcomed. Although it has a high exit rate this is stated in its KFI and the borrower can then factor in this figure.”
However, Ron Stout, assistant director of PR at Northern Rock, made the point that the arrangement and exit fees are not the most important factor. “There is a cost associated with any service but we endorse the view that customers should look at all parts of the product, including any hidden or additional costs.”
