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Last Updated: Friday, 26 January 2007, 11:07 GMT
FSA moves on mortgage exit fees
Man signing cheque
Mortgage exit fees are supposed to cover the cost of paperwork
Lenders that raise mortgage exit fees may have to "justify" their actions to the Financial Services Authority (FSA).

Exit fees are usually between 150 and 300, and are levied when a borrower pays off their mortgage.

The FSA wants lenders to either charge nothing, stick to the original fee or show good reason why it needs to rise.

People who have already paid an exit fee may be able to get a refund if they paid more than was originally set out and the increase cannot be justified.

Fees soared

We expect these measures...will stop borrowers from being surprised by unexpected increases in these fees
Clive Briault, FSA

The level of mortgage exit fees has soared in recent times.

Last year, the BBC News website found that some had more than doubled in the past five years.

This has led consumer groups and some independent financial advisers to cry foul.

These groups have claimed that lenders have been profiteering from the fees.

In response, lenders have said the fees are to cover the cost of administration.

The FSA has been looking at the issue of exit fees since 2005.

It did not comment on how the exit fees had risen in previous years, instead preferring to outline how it expected lenders to behave in the future.

The watchdog said that from 28 February, lenders will have to:

  • Charge no fee
  • Stick to the original exit fee
  • Increase their fees but only if justified.

"We expect these measures...will stop borrowers from being surprised by unexpected increases in these fees," Clive Briault, FSA managing director, said.

"People will now know when they sign-up for a mortgage what fee they will pay on exit, or should be given a clear idea of how the fee might be increased fairly," he added.

The Council of Mortgage Lenders (CML) said it "welcomed" the FSA's statement.

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