RBS under fire over mortgage fee
May 14, 2009
Bailed out High Street bank, Royal Bank of Scotland has recently been under fire after announcing that it was charging a non-refundable and hefty fee on its mortgage.
The bank announced that its mortgage would be subject to a fee of £995, by way of an arrangement fee, and that the money would not be refunded to the applicant even of the mortgage did not then go ahead. The bank has also been under pressure from the government to increase its residential lending, and is now 70 percent owned by the taxpayers as a result of the bailout.
The new charge rule will apply to customers that use brokers to get a mortgage through them, as well as to those that come directly to a branch to apply for a mortgage. One mortgage broker stated: “Even if they walk into a branch of the Royal Bank, if they go through the application process and an offer of loan is produced, and then for whatever reason the mortgage doesn’t proceed - the seller pulling out or whatever - the person is charged £995.”
The mortgage broker also went on to state: “It would be bad enough if they were a profit-making organisation, but this is an organisation that has just been bailed out for their own incompetence. It would not be so bad if they made it crystal clear but they don’t. We are in an environment where we are supposed to treat customers fairly.”
Another industry official said that this sort of practice was pretty uncommon in the UK mortgage market, and that RBS was only the second lender she had heard of that was doing this. She said: “I have heard of Abbey doing it but nobody else. It looks as though it is a way of them making some extra money - £995 is a lot of money, and deals do go wrong. There is no guarantee that one will go through.”
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