Lenders charge exit fees when customers redeem their mortgage in full, for example, by switching their mortgage to a rival lender. Exit fees can also be termed administration charges, sealing fees or deeds-release fees and are raised to cover the cost of taking property deeds out of storage, sending them to a solicitor and producing a final account statement. Borrowers are warned when they sign up that if they switch lenders, they’ll have to pay a fee – but the size of that fee is not guaranteed to stay the same.



Within the last few years, lenders have increased their exit penalties steeply, with some now topping the £300 mark ( ). Firms have claimed that these hikes are necessary because of their increased costs and extra work, yet this justification appears hollow when one considers that property deeds are now held electronically at the Land Registry.

Alistair Good, Managing Director of MIAS said: “One client, whose penalty had increased from £85 to £195 compared it with entering a car park where the prices were clearly displayed, only to find that they had more than doubled when it was time to pay.

He added: “While we appreciate that lenders need to recoup the costs incurred when a mortgage is redeemed, borrowers need to be informed about these costs at the outset. If the fee is excessive, then the client can look elsewhere.”

Although exit fees make up a tiny percentage of overall mortgage costs, it is unfair to hit a customer with an unexpected charge, which can reach £300. MIAS would like to see lenders state their exit fees clearly – and fix them at the outset of deals. In this way, the client is treated fairly, in line with FSA guidelines.

One example is Northern Rock. Although they charge the relatively high fee of £250, they do commit to charge the fee stated when the client signs up for the mortgage. MIAS would like to see more lenders adopt this approach.

Commenting, Roger Milbourn, Director of MIAS, said: “Exit fees, though unpopular with customers, are here to stay. But if lenders are to lose the tag of “back door charging” and reduce the flow of complaints to the Financial Ombudsman Service, they must be more transparent about these fees.

“We see no good reason why the exit fee cannot be fixed for the life of a mortgage, so that the client would be aware of the charge from the start. Under the current system, exit fees can increase by more than 350% by the time the client comes to redeem his or her mortgage. This makes a mockery of the FSA’s requirement to treat customers fairly despite their claims that they are not a pricing regulator.”

In the absence of fixed exit fees, it is imperative for mortgage brokers to go through closing charges carefully with the client. The adviser should explain that the borrower may incur a punitive charge if they switch lenders or pay off their mortgage early ( ) and in this way, broker and client can compare products fairly.

For further information, please contact:

MIAS Ltd

0845 833 0878

Managing Director: Alistair Good

alistair@mias-ltd.co.uk

Director: Roger Milbourn

roger@mias-ltd.co.uk

Notes to Editor:

The Mortgage and Insurance Advisory Service (MIAS Ltd) is a firm of impartial mortgage advisers, offering a comprehensive service to clients seeking residential and commercial mortgages and mortgage protection.

Founded in 2002, MIAS has quickly gained a reputation for providing straightforward, impartial mortgage advice, matching clients up with some of the most competitive deals around. MIAS’s experienced brokers have expertise in all sectors of the mortgage market and look after the whole transaction from beginning to end, making the process as smooth and as headache-free as possible.

For further information on the services MIAS offers, please visit