C&G scraps exit fees on new mortgages

Cheltenham & Gloucester is the latest mortgage lender to scrap mortgage exit fees as the deadline for lenders to report to the FSA on exit fees approaches.

With immediate effect, C&G will no longer charge a mortgage exit fee on all new mortgages. The fee was previously at £225, but has risen almost six fold from £40 in 1997.

A spokesperson for C&G says: "As the FSA deadline for reporting on Mortgage Exit Administration Fees (MEAF) approaches, C&G has dropped the MEAF on all new mortgages. This is our interpretation of the FSA's guidelines."

The FSA began investigating mortgage exit fees in 2005 after complaints that lenders were unnecessarily increasing their charges and were not complying with the Unfair Terms in Consumer Contracts Regulations 1999.

C&G is the fourth lender to scrap exit fees in response to the FSA's inquiry and joins HSBC, ING Direct and Stafford Railway BS. Bigger lenders such as Mortgage Express, Abbey, Northern Rock and Barclays have yet to make a similar move.
Lisa Taylor, analyst at Moneyfacts.co.uk, comments: "On the face of it, it's great news that lenders are taking the FSA enquiry seriously. And it's only right that borrowers should not be faced with unknown fees, or charged amounts that bear little relation to the cost actually involved."

However, Taylor is concerned that forcing lenders to drop one revenue stream will cause them to recoup the lost income by other methods, such as higher arrangement fees or interest rates.