Once again the charging of excessive fees by financial organisations has come under the spotlight. Recent concern about excessive credit card and bank account fees is now followed by a focus on the mortgage industry and the administration fees that mortgage providers charge when they setup and close mortgage arrangements.



A few years ago these fees were very small or not charged in some cases. However they have increased sharply over recent months and the FSA wants to know why. My view is that recent legislation changes and more competition have meant that the mortgage companies have been unable to earn money in the usual ways on their products, so they have just taken the easy route of hiking up fees in order to keep profits high. Companies such as Abbey, Alliance and Leicester, Cheltenham and Gloucester and Northern Rock all charge between £250 and £300 pounds to close a mortgage. Nationwide which previously had no exit fee now charges £99.

In addition to exit fees increases, arrangement fees have also jumped recently to levels as high as £700 in some cases. The Council of Mortgage Lenders which represents the banks and building societies on mortgage matters claims that although fees have increased, other charges had gone down and that interest rates are now lower. The FSA is not about to buy that excuse we suspect and has asked for an explanation. It's disconcerting that mortgage companies claim to be lending at lower interest rates when rates are largely controlled by external factors.

Customers who have suffered are being encouraged to complain to their lenders in the first case and then refer to the Financial Ombudsman service if they are still not satisfied. It seems that if you complain in an organised and well-documented manner, then your fees will either be reduced or refunded completely – a sure sign that the mortgage companies are worried about picking a fight with FSA.