ADMIN FEE

As the Remortgage market increases many lenders are offering great deals to attract new customers, whilst increasing exit penalties on the mortgages of their existing customers to try and deter them from leaving.

Abbey mortgage customers have recently been sent letters telling them the cost of leaving their mortgage is rising to £225. This is a rise of £46, or 25%. And Abbey is not alone.  (Correct as of 1/5/05)

Many of the other lenders are now charging people a lot more to move. Alliance & Leicester is top of the worst-buy table. It now charges £295. (1/5/05)

This charge is over and above any penalty levied for leaving a special deal early, and affects all customers. And Abbey is not alone. Fifty three lenders have put this charge up in the last 12 months, and 23 of those have more than doubled the cost.

The exit charge is to cover administration costs, including deed preparation; redemption statements, and dealing with solicitors' enquiries. As more and more people look to remortgage some lenders have had to greatly increase the number of staff working in the redemption department to cope with the number of enquiries.

In fairness to the lenders in the past they may not have been concentrating so much on recovering the fee directly from the customers who are causing the cost. They may have included it in their interest rate.

The early repayment charge certainly acts as a deterrent to people who are thinking of re-mortgaging, though over the long term this charge can usually be more than made for. Sometimes the monthly savings can be so great that the fee can be recovered in 1 or 2 months of lower payments.