The UK Financial Services Authority has responded to recent increases in mortgage exit administration fees, stating that it will require lenders that continue to charge increased fees to justify their actions and refund those borrowers that have been affected.

Mortgage exit administration fees (MEFAs), often charged by lenders when borrowers pay off their mortgage or switch to another lender, are charged to cover administrative costs. Recent increases have, however, met with criticism and calls for the Financial Services Authority (FSA) to expose lenders imposing unfair charges.

The FSA has stated that, with regards to current customers, lenders must decide by February 28, 2007, whether they will charge no MEAF, the original or revised lower MEAF or their current increased MEAF. Those that decide to charge the latter will be required to justify their decision.

The regulator added that past customers who are unhappy with their MEAF charges must be treated in the same way as current customers. If those who have been charged an increased MEAF complain, they can expect a refund of the difference between the actual MEAF paid on exit and the original MEAF.

According to This is Money, millions of borrowers could receive up to GBP200 each after the FSA ordered lenders charging MEFAs of up to GBP295, when the administrative costs are as low as GBP50, to refund the charges.

The online news site named a number of lenders that will have customers eligible for refunds, including Alliance and Leicester. This lender had almost trebled its original fee to GBP295 by the end of 2004, but, according to This is Money, has confirmed that it will refund those customers who have been charged increased MEFAs.

Clive Briault, FSA managing director of retail markets, said: We expect that these measures, agreed with the Council of Mortgage Lenders, will stop borrowers from being surprised by unexpected increases in these fees. People will now know when they sign up for a mortgage what fee they will pay on exit, or should be given a clear idea of how the fee might be increased fairly.