Recent research by the Money facts mortgage team has highlighted an alarming increase in the number of mortgage providers who have increased their redemption fees.
In the twelve months to 31 March 2005, 53 providers have upped their redemption penalty, 23 of which have increased by over 100%. Some examples of the higher fees are Alliance & Leicester increasing their fee from £195 to £295, Cheltenham & Gloucester from £100 to £225 and The Royal Bank of Scotland from £75 to £225.
With the mortgage market as competitive as it has ever been and with interest margins being eroded, lenders are increasing these fees to try to recoup some of this lost revenue but also to try to deter customers from switching their mortgage.
The redemption fee, also known as a discharge fee, deeds fee, exit fee or sealing fee, is basically an administration fee that you will have to pay when you repay your mortgage or move your mortgage from your existing lender. When these fees are increased, it is important to remember that they don’t just apply to new applicants, but also to the many thousands of existing customers with the lenders concerned.
Darren Cook, Head of Mortgages at Moneyfacts comments: “If you are only looking at keeping your mortgage with the same provider for a couple of years, a £295 exit fee certainly needs to be taken into account when shopping around. With 42 providers having an exit fee of less than £100 and 16 with no fee at all, it is worth weighing up the impact of these lower fees, not just the interest rates.”