When deciding about what to write on in these pages, I always begin by trying to find something positive and informative to share with readers. Some great product news; a new lender with a new proposition; or simply the best fixed rate since the dawn of time. I let this positive outlook slide last month, with a moaning article on lendersÂ’ exit fees. For those who may have missed it, these are fees charged at the end of a deal to redeem your mortgage. As scandalous as these are, we have found something that, in pure percentage terms, makes exit fees look a bargain. I really do not like to moan, but here goes.
LendersÂ’ Telegraphic Transfer fees are another debacle that need highlighting and a cause that we at John Charcol have decided to take on. Our research found that these fees can be inflated by as much as 1,500 per cent. That is not a miss-print – youÂ’d never get that in such a quality magazine – 1,500% (repeated for dramatic effect). These fees are charged for the transfer of mortgage funds from a lender to a buyerÂ’s solicitor and then to the sellers solicitor, and the combined annual loss for consumers is a staggering £23 million. Not exactly small change.
It does get a little boring banging on about fees and how they are to the sole detriment of the consumer. Yet it is a crusade that needs to be fought as lenders should simply not be allowed to just bolt on fees here, there and everywhere in an attempt to generate income streams where consumers least expect it. If products have become too competitive for some lenders and they have become true victims of their own success then hard luck.
Many governments over the years have been accused of using stealth taxes to generate income, hidden under the cape of more positive public relations elsewhere. It seems that lenders are all too keen in trying to follow this lead by effectively burying these fees. I know that many counter with the argument that their fees are upfront and there for all to see, but I have been a first-time buyer and I know what happens. Over the moon that someone has agreed to lend you the money to purchase your first home, the devil that always lurks in the detail is not of any great concern. Picking over each minute detail of a mortgage is not something that lots of people do and this is where some lenders thrive.
Most banks charge around £25 for this fee but organisations with a large use, namely our friendly banks and building societies, negotiate huge discounts of around 90 per cent – so the real cost is somewhere just below £3. This is a mark up that a motorway service station would be very proud of. Perhaps even more frustrating is that some banks, who act as clearing banks, will not even incur one pence in charges for this. The phrase money for old rope springs to mind.
Also, and this is something that you may or may not be aware of, the Financial Services Authority has a principal of Treating Customers Fairly, which all financial institutes that are regulated by the FSA must abide by. I cannot see how these fees will be allowed to continue in the long run as it is such blatant profiteering. There is little doubt that some fees associated with a mortgage represent a reasonable reflection of the true costs involved, but it does not take a rocket scientist to work out that these fees do not even remotely get near to falling into this category.
The good news is that the cause has been taken on by a number of national newspapers recently so this should bring it to peopleÂ’s attention sooner rather than later. Will we see one lender make a very consumer friendly move and just charge £3 for this – it would undoubtedly provide some good coverage for them.
The point is, if people do not stand up and make a fuss about things like this then the financial institutes will never, ever change. Only through persistent pressure do these things ever get changed. Happy moaning!
