Existing customers (contracts issued before 1 August 2007)
In the Statement, we set out five ways in which we believe lenders would treat their existing customers who already have a mortgage contract. We said they would charge:
- no MEAF;
- the original MEAF;
- a revised MEAF which is equal to or lower than the original MEAF;
- a revised MEAF which is higher than the original MEAF; or
- the current MEAF.
We said that we would be less likely to take action against a lender if it had decided by 28 February which of the five outcomes it would adopt for existing customers. We also said that we may investigate further any lender that chose the last two outcomes. To assess lenders' responses to this, we asked all UK-regulated residential mortgage lenders which option they would choose.
Over 95% of the industry, including all the major high-street lenders, chose one of the first three options, which means that existing customers will be charged no MEAF, the original MEAF or a lower amount.
The other firms have opted to either revise their MEAF and charge existing customers an amount higher than the original MEAF, or charge the current increased MEAF. We required these firms to justify their decision to do this and are reviewing the information each firm provided. If lenders are unable to justify their position, we will take further regulatory action.
This was a practical solution which aimed to quickly stop existing consumers being charged for unfair and unexpected increases in the MEAFs compared to what was stated in the original terms of the contract. This aim has been achieved as the great majority of existing customers will benefit from no increase to their MEAFs.
Future customers - customers who take out a mortgage from 1 August 2007 onwards.
Past customers - customers who have paid a mortgage exit administration fee in the past.
