Thousands of homeowners may be in line for a refund after the financial watchdog announced it was taking action over mortgage exit administration fees (MEAFS).
The Financial Services Authority (FSA) said it was responding to recent concerns that MEAFs had been increased unfairly, so consumers were being charged higher exit fees than they had expected to pay.
Lenders often charge MEAFs when borrowers pay off their mortgage or switch to another lender to cover the staff and other costs involved.
The FSA has now given lenders until the end of February to decide whether they charge no exit fee, charge the original fee that the customer signed up to or charge a lower fee than they currently enforce.
If, however, mortgage companies plan to continue charging higher fees they will have to justify their position to the FSA.
Clive Briault, FSA Managing Director of Retail Markets, said: ‘We expect that these measures, agreed with the Council of Mortgage Lenders, will stop borrowers from being surprised by unexpected increases in these fees.
‘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.’
The FSA said the new arrangements also applied to past customers who will be able to claim a refund if they had to pay higher charges to exit their mortgage than they’d initially agreed.
Which? personal finance campaigner Emma Bandey said: ‘Which? welcomes the work the FSA has done to put a stop to ever-increasing mortgage exit administration fees. We now urge consumers to challenge their provider if they feel they have paid more than they originally agreed in their mortgage contract.
‘In a similar vein to unauthorised overdraft charges, these fees should only represent the administration costs involved. They should not be endlessly escalating, arbitrary figures and lenders must be able to justify them.
‘The next step for the FSA is to name and shame those that won’t comply.’