Abbey criticised for rate switch fee

The "Product Switch" fee was introduced on Monday and is payable upfront when the customer switches deals and cannot be capitalised within the mortgage. Abbey says the additional charge covers the administration costs of processing the mortgage for a second time.

A spokesman for the lender explained: "It is only payable if the application has been agreed and the survey already instructed. At the time a customer applies for a mortgage, funds are secured by Abbey and therefore reserved for them to complete. If they decide to change to a lower rate product, Abbey is still paying the higher rate."

But brokers said the move is "unhelpful". Fahim Antoniades, director of Quantum Mortgages, said: "This is just another excuse for charging money. The idea the £199 is an admin charge does not wash. What does it cost to switch data on a system?"

David Hollingworth, mortgage specialist at L&C, said the fee will impact on the benefit to the customer in switching.

"Brokers will clearly factor this additional cost into whether it still makes sense to switch the rate. In the current climate, clients are unsure of what to commit to and the potential to incur a fee if a better rate is subsequently launched will not help in reaching a decision."

This article was first published by IFAonline, part of the Incisive Media group.