House prices soar by four times the rate of inflation

Tens of thousands face huge "exit fees" which are set at a level up to eight times' more than the actual cost to the bank or building society.

An exit fee is a charge for switching from one lender to another, or charged when a mortgage comes to the end of its term.

But the average exit fee is now £187, compared to the actual cost to the lender of just £35, according to the report from the bank ING Direct.

It calculates that exit fees totalling a massive £2 billion are locking in homeowners, who could save a fortune by switching to a cheaper mortgage.

Lindsay Sinclair, chief executive, said an exit fee which is more than £35 is "just another way to boost profits" for banks and building societies.

She said: "There is very little work involved for the lender when a customer wants to redeem their mortgage.

"The majority of the paperwork is handled by their solicitor who makes a separate charge for this.

"It costs us just £35 and we choose to absorb this cost. Anything above this is just another way to boost profits."

Exit fees have come under the spotlight in recent months after the regulator, the Financial Services Authority, said they had been "increased unfairly."

They were reacting to fury from homeowners that lenders have been hiking their exit fees after people take out a mortgage.

While other fees are fixed, many lenders increased their exit fee - and forced homeowners to pay the higher charge if they wanted to move to a rival.

For example, Alliance & Leicester currently charges one of the highest exit fees of £295 which was hiked from £195 in August 2004. In a welcome move, the FSA has told lenders to compensate borrowers who have been forced to pay the inflated exit fees.

Homeowners who complain to their former lender about the exit fee which they were charged are expected to scoop compensation worth £200 million.

If you took out a home loan with Alliance & Leicester, for example, you would get about £100 in compensation. This is the difference between the level of the exit fee when you took out the mortgage, and the level of exit fee charged when you left the lender.

The FSA has warned lenders that it may crack down on lenders which charge exit fees which are more than the true cost of closing a mortgage.

A spokesman said: "If the cost charged is greater than the actual cost, then it is potentially a breach of the contract and could be unfair."

Lenders have until July 31 to comply with the regulator's demands to charge an exit fee which reflects the actual cost of leaving a mortgage deal.

If they fail to comply, lenders could face an unlimited fine or could be "named and shamed" by the regulator.

Experts have urged all homeowners who have redeemed a mortgage since 2004 to demand their money back.

The refunds could be worth up to £100 each, but the profit-hungry banks will only pay out if a person writes or telephones to complain.

Ray Boulger, senior technical manager at the mortgage broker John Charcol, said: "Around 10 million mortgages have been redeemed in the last four years.

"Many of these borrowers will have a very strong case for seeking compensation from their lender due to the excessive increases."

Alliance & Leicester, which has been singled out for its high £295 charge, said it has no plans to cut the fee.

A spokesman said: "We ask people not to look at one fee in isolation."

She insisted that its mortgage deals are good value, if all the fees and mortgages costs are taken into account, rather than focussing only on the exit fee.