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Did you switch mortgage or pay it in full prior to Jan 2007? If so, it's likely you were overcharged by your old lender, possibly by £100s, and you can get this money back. This step-by-step guide will show you how to reclaim your cash in minutes.
It's all about 'mortgage exit fees', paid when closing a mortgage account (including shifting to a new lender). Sneakily some lenders charged more than their contracts stated but in January '07 the regulator announced if "past customers have paid a higher fee they can expect a refund of the difference". Yet if you don't ask, you don't get.
In This Guide
What is a Mortgage Exit Fee?
Pay off a mortgage and you'll be charged a fee, technically known as mortgage exit administration fee (MEAF). It's supposedly to cover staff, legal and admin costs e.g. changing the registration of the property at the Land Registry. MEAF's are known by a variety of other names including 'deed release fees', 'sealing fees', 'final administration fees', 'discharge fees' and 'final redemption fees'.
A MEAF is just one type of mortgage fee, don't get it confused
A MEAF is a very specific charge, and this ruling only applies to it; arrangement fees and other fees that are paid when you take a mortgage out are not part of this.
MEAF's are commonly confused with 'early repayment fees', also known as 'redemption penalties'. They're not the same thing, and this ruling doesn't apply to redemption penalties. To clarify:
-
Early Redemption Penalties can't be reclaimed. These are charged when you repay or switch mortgage during a special deal, such as a fixed or discount rate (see the Mortgage Guide / Remortgage Guide for details).
-
MEAFs can be reclaimed. These are always charged when you pay off or switch a mortgage, regardless of what your deal is. This means you can sometimes pay both a 'redemption penalty' and a MEAF.
Why can you get your money back?
MEAF costs accelerated quicker than Richard Hammond. In 1997 they cost around £60, but some have climbed to nearly £300.
In January '07 the FSA told lenders they must justify these increases; and noted many lenders were charging people much more than it stated in their original contracts. Lenders' excuse was the contracts contained clauses allowing them to "vary the fee over time", but the FSA said as the term can be varied without the consumer agreeing, this falls foul of the unfair contract laws.
Lenders were given until the end of February '07 to decide on what action they'd take for past and current customers, and in most cases they simply agreed to refund customers the difference and over 100,000 people have been through the reclaiming process via this site alone.
Why have lenders increased MEAFs so much?
I believe it's part of an increasing attempt to gemmy the competitive mortgage market. As many best buy tables work on the 'lowest interest rates', lenders have deliberately kept rates low, but increased fees to pay for it; so they look cheap, even when they're not. Yet it now turns out, with MEAFs anyway, this simply isn't allowed.
As well as MEAFs, the same's true with application fees among others, which a few years ago were typically £300, but are now often £600 - £1,000. For this reason you should be very careful when choosing a mortgage (see the mortgage or remortgage guides).
Step by Step reclaiming guide
All major lenders have been offering past customers a refund of some or all of the difference between what their contract stated the MEAF would be and the actual charge. This makes the reclaim process really simple, and all you need do is write a template letter or make a five minute phone call, asking for your money back.
Some lenders will also give you interest on top of your money. If you want to ask for the interest, and your lender isn't giving it automatically, though the interest isn't likely to be too huge (for example 8% interest on £100 over 5 years is £40), here's a template letter to help:
If in doubt just call ‘em up
Even if you don’t have a clue about what you were charged, reclaiming should be pretty easy. Just call your old lender and say “I’d like to reclaim my old mortgage exit fee please”.
When it asks for details say you don’t have them, and ask it to let you know what you were charged and what your contract says. Most will do this without a problem. If it asks you why you want to reclaim, just say “because the regulator, the FSA says I was overcharged”.
The table of lenders below is a guide to past MEAF rates compiled in 2007, so you can work out roughly how much you'll get back.
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Mortgage Exit Fees: Lender by Lender information
Lender |
Pre Jan 07 |
Post Jan 07 (if changed) |
Jan 02 |
Jan 97 |
How to Reclaim |
|
A&L; |
295 |
- |
150 |
90 |
Mightn't offer the entire difference as fee structure was changed in Jan 04. Call 0870 901 1001 (changing to 0844 8000 080 soon) or write to Mortgage Customer Relations, Alliance & Leicester plc, Carlton Park, Narborough, Leicester LE19 0AL to find out about your specific case. |
|
Abbey |
225 |
0 (new 225 ‘mortgage account fee‘) |
85 |
50 |
Call 0845 716 5905 or write to Abbey, Cr Team, PO BOX 286, Stockton on Tees, TS17 6QQ. |
|
Barclays / Woolwich |
275 |
- |
95 |
50 |
Contact on dedicated telephone no 0800 0234180. If this no longer works try customer services; 0800 316 5500 for Woolwich customers and 0845 609 0856 for Barclays. |
|
Bradford and Bingley |
235 |
- |
tbc |
tbc |
Would like people to write to Customer Relations, PO Box 2, Main Street, Bingley, West Yorkshire, BD16 2LW. |
|
Bristol & West |
195 |
0 (new 195 ‘core term fee‘) |
150 |
50 (plus 10 days interest + 37.50 deeds release) |
Contact at Customer Relations Mortgages, Bristol & West Plc, One Temple Quay, Bristol, BS99 7AX or standard customer services telephone number. |
|
Britannia |
75 for each sub a/c |
Max 125 |
50 |
50 |
Call 01538 392700 or write to Customer Feedback Centre (C097), Britannia, Newton House, Leek, Staffordshire, Moorlands, ST13 5RG |
|
C&G; / Lloyds |
225 |
0 |
50 |
35 |
Call 0845 6031637 or write to Cheltenham & Gloucester, Chief Office, Barnett Way, Gloucester GL4 3RL |
|
Clydesdale Bank / Yorkshire Bank |
195 |
- |
None |
None |
Write to the branch where you held your account or Customer Relations - Wealth & Mortgages, Level 4, Box 25, 40 St Vincent Place, Glasgow, G1 2HL. |
|
Coventry BS |
195 (inc. deeds fee) |
125 |
55 + 40 deeds fee |
55 + 40 deeds fee |
Would prefer people to write to Customer Relations, Oakfield House, Binley Business Park, Coventry, CV3 9YR or can phone 0845 7665522. |
|
Dunfermline BS |
199 |
- |
75 |
50 |
Have stated that their "costs are justified" so may not make a refund, but that any complaints will be looked at on a case by case basis so call on 0845 6012218 or write to Dunfermline Building Society, Caledonia House, Carnegie Avenue, Dunfermline, KY11 8PJ. |
|
Halifax |
225 (inc. deeds release) |
0 |
125 |
55 |
Call the mortgage team on 08458 50 37 05 and you may be sent a form to complete. |
|
HSBC |
None |
- |
None |
None |
Doesn't charge an exit fee - so no need to do anything! |
|
Kent Reliance BS |
225 |
150 |
tbc |
tbc |
Call 0845 122 0033 or write to standard customer services address. |
|
Nationwide BS |
90 |
- |
0 |
67 |
Would like people to write to Mortgage Operations, Nationwide, Kings Park Road, Moulton Park, Northampton NN3 6NW. |
|
Natwest / Royal Bank of Scotland |
225 |
0 |
85 / 75 |
65 / 80 |
Call 0845 3020190 (Natwest) or 0845 7212600 (RBS) or write to Mortgage Operations, PO Box 19505, Greenock, PA15 1EF |
|
Northern Rock |
250 |
0 |
150 |
75 |
Has £15 million set aside to pay claims. Wants people to write to Customer Support, Northern Rock PLC, Northern Rock House, Regent Centre, Gosforth, Newcastle upon Tyne, NE3 4PL, and include a contact telephone no. If a refund is due they will ask you to sign a declaration form. |
|
Portman BS |
195 |
145 |
tbc |
55 |
Would like people to write to Portman BS, Portman House, Richmond Hill, Bournemouth, BH2 6EP. |
|
Skipton BS |
175 |
125 |
75 |
tbc |
Call 0845 8501700 or write to Customer Relations, Skipton BS, The Bailey, Skipton, BD23 1DN. |
|
Standard Life |
200 |
0 |
150 |
0 |
Write to Standard Life Bank, Customer Relations Team, Dundas House, 20 Brandon Street, Edinburgh, EH3 5PP |
|
West Bromwich BS |
300 |
200 |
tbc |
tbc |
Would like people to write to West Bromwich Building Society, Customer Care Team, 374 High Street, West Bromwich, B70 8LR. |
|
Yorkshire BS |
199 |
- |
100 |
tbc |
Call 0845 120 0100 or write to Service Quality, Yorkshire House, Yorkshire Drive, Bradford BD5 8LJ. |
|
This information is from a variety of sources, including direct contact, MoneySavers forum feedback, Moneyfacts and other sources. If the details are not correct just call the number of the banks' mortgage team. |
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Want to get more militant?
Above we've relied on the FSA's stance but if you want to get more militant, some MoneySavers have successfully pursued the lender for more, or even all of the charge. Yet, as this option is not supported by the FSA, it's not as straightforward and your lender might not give in easily, meaning it could end up with you taking court action.
Why ask for all the money back?
It's arguable that MEAF fees aren't justified, the basic concept is that under UK contract law you can't fine someone for breaking a contract, you can only charge them an amount proportionate to the cost of the breach.
The actual administration cost to a mortgage lender of closing down a mortgage isn't thought to be much more than £50 so it's arguable that you needn't pay more than £50, regardless of what your contract says. Therefore writing to your lender, asking it to justify the charges with a full breakdown, and if it refuses asking for a full refund, can work.
If you want to adopt this more militant approach (we're not specifically advocating it, but as it's worked for some, we are giving it as an option) then the following template letter should help, though if your lender refuses you may then need to threaten small claims court action. If this works for you please feedback.
What about my current mortgage?
In July '07 lenders had to explain their current charge to the FSA. Some chose to stick with their current fees, some decided to reduce them and others slashed them completely.
From then on, we should know what exit fee we'll pay when we sign up for a mortgage, or we should be given a clear idea of how the fee might be varied in the future. This should not be more than the actual cost involved in ending your mortgage.
A trick to keep the fee down
If you do want to repay your mortgage in full, there is a further trick you can play. Rather than paying it off, why not pay it down to around £50, and keep it open. You'll pay a tiny amount of interest on this amount, but it'll be much smaller than any fee. Though do check your contract, as it may specify you need to keep in more money or even that there is no exit fee if you repay in full.
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