Discussing a case where a client paid a £499 booking fee for a two-year fixed rate deal, an undisclosed source told Mortgage Introducer: “Lenders charge a booking fee for the privilege of fixed rate deals. The FSA states that, wherever possible, the best practice is to pay the fee up front, rather than add it to the loan, where the fee gains interest throughout the life of the mortgage.
“However if the lender then turns the client down, most of them keep the booking fee. If the borrower was to include the fee as part of the loan, they wouldn’t have to pay it. This is definitely an issue around ‘Treating Customers Fairly’ (TCF). How can the lender get away with keeping the fee if the deal doesn’t go through and the client paid it up-front, but waive it if they wanted to add it to the loan? It doesn’t make any sense.”
However, the regulator has said that it adopts a neutral stance on when fees are paid during the mortgage application process, as long as the details of the payments are made clear to customers. A spokesperson for the regulator said: “We are neutral about when fee payments on mortgages are made. The only thing we insist on is that details about when and to who it is payable, and whether it is refundable is stated in the Key Facts Illustration (KFI).”
Paul White, a consultant at Belgravia Insurance Consultants, said he thought the FSA should be encouraged to review its guidance. He said: “I would recommend the regulator looks at its guidance on these fees and make it clear that if the mortgage case does not proceed, the lender can keep a reasonable amount of the booking fee, for example, £75. Anything above that amount is excessive.”
