Here's A Reminder Of The Bank Fees You Could Be Clawing Back

UK Home repossessions have risen almost 30 per cent over the past year, according to recent findings by the Council of Mortgage Lenders. What that translates into is 14,000 homes being repossessed in the first six months of 2007… and things look set to get worse, according to many pundits.

And that’s not the only bad news: the stormy times look set to continue in the stock markets. This is something that should concern all of us, not just those who are playing the markets. It’s all in the mix, and the international status of cities like London means that financial market turmoil ripples through the economy and can ultimately undermine employment trends and purchasing power. In fact, the boss of one of Britain’s best-known retailers was reported as noting that the spending power of those on £30,000 incomes has fallen by a quarter in the past couple of years.

Hurrah, then, for the Financial Services Authority. Homeowners can now reclaim so-called ‘exit fees’ on mortgages, as reported in the Sunday Telegraph – but there’s a rush to the gate for those trying to claw back bank fees and overdrafts. Here’s a reminder of some of the bank fees YOU could be clawing back from your bank:

Claw-Back Target #1: overdraft charges. Bank customers seem to be getting their own back. A full £1bn has been reclaimed on overdraft charges levied over the past two years. But the music stopped playing – rather abruptly – when, unsurprisingly, the banks agreed with the OFT at the end of July to test the legality of these charges in court. And it could take up to two years for a view to be offered in court… Don’t hold your breath.

Claw-Back Target #2: credit card fees. The OFT did rule that the commonplace £30 penalties for missing monthly credit card payments should be cut to a more equitable £12. So if you’ve been hit with anything more than this, you can claim it back.

Claw-Back Target #3: mortgage exit fees. As mentioned above, if you’re one of over 12m households who have switched mortgages in the past five years, then you might well be due a refund on exit charges – and that adds up to an average of £180 (but could be nearly £300 if you’re with certain providers). Keep in mind that you won’t be able to reclaim ‘early redemption’ penalties that might have been imposed when you paid off a mortgage during the timeframe of a special deal, such as a fixed-rate deal.

The Biggest Shake-Up Of The Mortgage Market For Decades?

The Government’s moves toward 25-year fixed-rate mortgages could potentially cause an industry shake-up, according to Sean O’Grady. Today on Radio 4 they did a whole programme on the subject. But can Gordon Brown really convince Britons to lock into a long-term agreement that outlives many marriages? Why is this being mooted?

When I moved to Britain in the late Eighties, I was amazed to find short-term deals of just a few years. After all, in the US and mainland Europe, mortgages that span just a handful of years are uncommon; unthinkable to some. But why? Long-term fixes have a few benefits that contribute to the stability of both the housing market and the economy itself. On a household-by-household basis, the so-called ‘churning’ of mortgage rates and providers means that a staggering amount of money is given over to arrangement fees at each transaction.

So why do longer-term agreements seem like such a big gamble to the British public? Well, I’ve seen the late Eighties, where my colleagues were handing over the keys to their first-time-buyer flats because of negative equity. It was heartbreaking. Those same people enjoy telling me, of late, that “my house goes up in value by £100 a day! Drinks are on me.” The thing is, over the span of 25 years you will see some good times and you’ll see some bad times. It’s the nature of a market economy. Now that Nationwide has entered the long-term market with a deal that’s just over 6%, we may see many Britons joining up with what has been commonplace in America for generations.

In the meantime, many who have seen their short-term rates expire have been set up with a nasty shock. Here are four strategies you might consider to cope with a higher mortgage, if the luck of the draw means you’re on the tail end of your short-term deal:

Coping Strategy #1: cut down on your repayments. If you’re coming to the end of a short-term and are temporarily trying to gain financial equilibrium, you might consider an interest-only deal for a short period. This would reduce your overall monthly payments. But you’ve got to keep your eye on the ball and switch back to a repayment deal when you get your bearings and cashflow within your household become a bit more balanced.

Coping Strategy #2: extend the term. Even though you’d be hit with a much higher interest bill over the entirety of your debt, extending the term might be a pragmatic measure – one whose aim it is to cut down monthly repayments and improve your cashflow over the shorter term.

Coping Strategy #3: compare the fees. If you’re borrowing a large sum of money, you might consider paying a higher arrangement fee if that means you are at the very rock bottom of variable and fixed rates. But you must weigh in all factors: lenders who are offering the cheapest rates might well claw back their outlay through levying hefty fees. One mortgage lender whose tempting offer (on the face of it, at least) levies an arrangement fee of 3.5% of the value of their loan. You’ve got to have your eye on the ball, considering you’d be adding well in excess of £5,000 to a mortgage of as little as £150,000.

Coping Strategy #4: be one step ahead of the game. Make certain that you switch BEFORE your fixed-rate period comes to an end. That sounds obvious, but we all get busy, don’t we? Wait, and you’re likely to be transferred to the lender’s standard variable rate – which is never as favourable. Borrowers with that £150,000 loan mentioned above could well see repayments increase by a THIRD if they sit on their hands as their lower-cost deal comes to an end.