Mortgages Exit Fees To Be Capped

Mortgages Exit Fees To Be Capped

Mortgages .​
Exit Fees to​ Be Capped.
In the​ last 3 to​ 5 years we have seen rises of​ up to​ 450% in​ the​ exit fees charged by lenders when borrowers redeem their mortgage .​
But at​ last the​ Financial Services Authority (FSA) ha seen the​ light and is​ going to​ crackdown on​ these increases.
Lenders have been telling new borrowers about the​ exit fees currently charged,​ but the​ lender has retained the​ right to​ increase those charges at​ any time and without advising borrowers .​
This amounts to​ a​ free hand to​ increase these charges and many lenders have taken the​ opportunity gladly.
Take the​ Woolwich for example; they've increased their exit fee from what was £95 to​ £275 .​
The Cheltenham & Gloucester has increased theirs from £50 to​ £225 .​
The lenders have clearly been trying to​ penalise those of​ us who regularly switch their mortgage to​ get the​ best interest rates – the​ so called rate tarts – and at​ the​ same time line their coffers.
However,​ the​ FSA is​ now in​ talks with the​ mortgage lenders to​ bring them to​ heal .​
The FSA wants fees to​ be fully disclosed at​ the​ outset and for the​ disclosed exit fee to​ be fixed for the​ duration of​ the​ mortgage .​
The FSA hopes to​ have agreed a​ binding undertaking from the​ lenders by June this year.
On a​ wider front,​ borrowers should always remember to​ take into account all the​ charges and money saving offers when working out which mortgage is​ cheapest for them.
To illustrate this point,​ let's say you​ wanted a​ 2-year fixed rate mortgage and were attracted by the​ offers from the​ Northern Rock and the​ Halifax.
Northern Rock currently charges an​ interest rate of​ 4.19% plus a​ 1.5% arrangement fee and an​ exit fee of​ £250 .​
Halifax's interest rate is​ 4.39% with an​ arrangement fee of​ £499 and exit fee of​ £175 .​
Within Halifax's package there's also a​ free valuation and free conveyancing that typically could save around £750 .​
So which mortgage deal is​ the​ cheapest?
Taking a​ 25 year repayment mortgage for £100,​000 and costing it​ over the​ first two years with redemption at​ the​ end of​ the​ second year,​ the​ Northern Rock comes out at​ £14,​671 .​
The Halifax comes out at​ £807 cheaper at​ £13,​864 .​
And this saving doesn't take into account the​ extra £750 valuation and legal savings offered by the​ Halifax .​
Therefore,​ assessed on​ this basis,​ the​ 4.39% headline rate offered by the​ Halifax is​ in​ fact the​ cheaper deal.
Another issue that will affect the​ true cost of​ your mortgage is​ whether the​ interest is​ charged on​ a​ daily,​ monthly or​ annual basis .​
On an​ otherwise like for like basis,​ annually calculated interest will always work out more expensive because for 11 months of​ the​ year,​ you​ are charged interest on​ money you​ have already repaid.
The best advice is​ to​ read all the​ small print! And remember that the​ lenders use all sorts of​ words to​ describe charges - application,​ arrangement,​ reservation,​ booking,​ completion and early redemption are all words to​ described charges or​ fees .​
Keep your eyes skinned!

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