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FSA warning to mortgage providers

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The Financial Services Authority (FSA) has said that if necessary it will use its powers to force mortgage providers to lower their fees. Several mainstream mortgage providers increased their fees with no apparent cause earlier this year, in some cases more than doubling them.

The FSA has said that it has found a number of administrative fees to be "unfair" because they suddenly increased for no reason, telling This is Money that it is currently negotiating with a number of lenders "to discuss how they can vary these fees in a way that is fair for consumers."

The FSA has the power, if necessary, to force providers to lower their fees or remove altogether the fees that they charge, but a spokesman said that it had not yet reached this point.

The FSA is particularly interested in mortgage exit fees which were suddenly and substantially increased earlier this year by several lenders. Alliance and Leicester raised fees from £195 to £295 in August 2004, and Abbey, one of the UK's biggest lender, increased fees from £99 to £225. Neither rise was linked to any increase in legal or administrative costs.

Other firms who have increased mortgage their fees since the beginning of this year include Nationwide, Northern Rock and Cheltenham and Gloucester.

"We are not concerned with the level of the fees, it's whether the fee increase is justifiable and valid. For example, if a lender can say that the legal costs associated with exit fees have gone up then that could justify an increase," said an FSA spokesman.

"Some firms have recently increased their mortgage administration fees. Some consumers have argued that, because firms have done this, they are acting unfairly.

"We have examined a number of mortgage contracts and have found some lenders who we think are changing their mortgage administration fees in an unfair way. As a result, we will work with lenders to discuss how they can vary these fees in a way that is fair for consumers," the spokesman added.

The spokesman refused to comment on which providers the FSA had been in contact with, but an Alliance and Leicester spokesman denied that the company had been approached. The FSA says that under the Unfair Terms in Consumer Contracts Regulations that if a company has been found to have treated a customer unfairly then it will be forced to make changes to its terms and conditions.

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