Their response to the news that the Financial Services Authority (FSA) is to look at mortgage exit charges is to attempt to justify them as being necessary in order to ‘cover their costs’. If that really is the case then they should have no difficulty in listing these ‘costs’ and explaining how the charges relate to them, should they?
I run a business and I can work out exactly what it costs to write a letter, send a fax, make a phone call or update my database and, I might add, I can do rather a lot of these things for the £299 that Alliance & Leicester (A&L) charges its customers to redeem their mortgage loans.
Indeed, RBS Intermediary Partners apparently does ‘calculate’ its fees, according to spokesperson Rob Davies, and has recently ‘done some work in this area’. What Davies failed to mention is that ‘doing some work’ involved increasing the sealing fee charged to One Account customers by 300 per cent, from £75 to £225. Coincidentally, this increase in its ‘costs’ has coincided with the amalgamation of the different RBS distribution networks, which was a cost-saving exercise.
Like I said, call me a cynic, but the reality I believe is that mortgage lenders charge these fees for one reason only – because they can. The only calculation that takes place is in deciding how much they can charge their customer, without causing an outcry. They bear no relation whatsoever to whatever minimal costs may be involved in supplying a redemption figure, processing a payment and updating their records, and for the lenders to even attempt to justify these fees is simply adding insult to injury.
I, for one, would prefer it if the lenders were simply honest on this subject. They should simply say the sealing fee is part of their overall charging structure which, together with the rate of interest charged and any arrangement fees, combine to make the transaction profitable for them.
Everyone, customers and the FSA included, expect mortgage lenders to make a profit from doing business and there is no shame in that. How the lenders decide to structure their charges in order to make a profit is their business decision. If they want to levy an exit charge in order to try and keep the business or profit from its loss, that’s fine too and there is no shame in that.
What is utterly shameful, however, is to dress up their exit charge as a justifiable fee ‘to cover costs’ and then to lie about having done it. Not only does it conflict with the ethos of ‘Treating Customers Fairly’, it could well be said to hinder the regulator’s stated aim of increasing public confidence in the financial services sector. After all, when all of the major lending institutions are prepared to lie about something as obvious as this, how can anybody have confidence in their honesty on any issue?
The fact that mortgage lenders are prepared to lie comes as no surprise to me and, I suspect, as no surprise to most brokers. Experience teaches us not to trust them, so it presents us with no real problems if they continue to do so. The regulator however, may take a very different view.
Mike Mullins.
Blue-print Mortgages Ltd
