HELP PLEASE!!! ERC's - Nationwide BS

deeblington

Hello everyone - advice required please! (I'm new to this so sorry if this is a little long-winded!!)

I currently have a 2 yr fixed rate deal with Nationwide, with an ERC of 2%, which would equate to roughly £2000. Last week a Nationwide branch confirmed this figure and said I could leave my current deal and revert to their SVR, and indeed it says on the FAQ's on there website:

"If applicable, an ERC will be applied to your account if you wish to close it or transfer to a different product. Also if an overpayment is made to the account (greater than the allowed amount per account - see statement summary sheet for details) a charge will automatically be debited. When the product ends the ERC is no longer due".

Surely this says that if I wish to close my account or transfer to a different product, I'm entitled to on the provision that I pay the fee or have it at applied to my account.

Nationwide are now saying that since January, existing borrowers aren't able to do this until there deal comes to an end - is it me or does this contradict itself.

I emailed Natiowide, and got a response that appears to be a bog-standard reply they are sending to any customer who wants to quit their deal and get on the SVR, guaranteed to be a maximum of 2% above the BofE Base Rate!?

Is this a cop-out? Can they do this? Has anyone else neen in the same position and got it sorted?

Cheers folks!!

koexelek

Loads of questions on thie recently.
Nationwide are making all their borrowers see out the term of their current deals before they are allowed to go on the SVR, even if you agree to pay the penalty on the current deal.
And yes, they can do that

Money_Maker_Shaker

Koexelek is right, unfortunately. I think the only way out would be to move your mortage to another provider but then of course you'd have to pay the ERC and any chargers from the new provider so it may not be worth it

deeblington

Monkeys!! I had a sneaking suspicion that would be the answer!!

I understand you can come out of the Nationwide deals 3 months prior to expiry, which in my case would be 16 months, and it would take 12 months before I'd see any benefit assuming rates stayed the same for this period so on reflection it's probably not worth the hassle and cost.

I am a bit miffed that Nationwide CAN make borrowers see their deals through, as I'm sure there are a lot of people out there who could benefit greatly from switching - obviously Nationwide have been hammered for guaranteeing their SVR at 2% above base, and are minimising loss but surely that was their gamble in the first place!!

Thanks for your advice folks - much appreciated!!

dunstonh

I am a bit miffed that Nationwide CAN make borrowers see their deals through

If it was the other way round and you were the lender and had someone come to you asking you to take a loss which you would have to pass on to your other customers, would you want to agree it?

I'm sure there are a lot of people out there who could benefit greatly from switching

Just as they would be better off staying put when the rates go back up again.

but surely that was their gamble in the first place!!

As was the choice you made on buying your deal in the first place.

deeblington

fair comment!

however, how can you bind someone to something and still have an ERC - surely that's their cop-out (and compensation if you like) if you want to bail out!? how are they taking a loss on interest they haven't received?? the money you've borrowed [and some] is still going to be paid back

i'm more miffed at the fact that they've committed to something, and because the base rate has dropped they've effectively moved the goal posts!?

you're right in that i took a gamble (as does everybody), and so did nationwide, but it's not like i have anything in my power to edge things in my favour, whereas the building society obviously has...

and i thought this website was about moneysaving!!
i guess its time to :beer: and forget about it then!! thanks for your input!!

koexelek

Nationwide are taking a very tough stance on this I agree.
Other lenders will let you buy out of your current deal and go to another one, as long as you pay the ERP of course, and any fees associated with the new product.... but Nationwide won't hear of it.

dunstonh

however, how can you bind someone to something and still have an ERC - surely that's their cop-out (and compensation if you like) if you want to bail out!? how are they taking a loss on interest they haven't received?? the money you've borrowed [and some] is still going to be paid back

A lot of fixed interest mortgages are funded by investors. The bank borrows the money from investors. The bank agrees to pay the investors back a fixed amount for the period of the mortgage deal. The bank lends that money.

If someone pays the mortgage off early or opts to come out of that deal, the bank still has to pay the investors right through to the end of the deal.

So, if the ERC wasnt there, they would lose money.

e.g. Investors get 5% p.a. of 5 years. Bank lends at 5.5%. You want to come out after 2 years to go onto say 3%. You want the bank to do that for nothing but the bank still has to pay that 5% for the remaining 3 years.

So, it would turn your mortgage from a 0.5% p.a. margin to a 2% p.a. loss for the remainder of the fixed period.

JayZed

deeblington wrote: »

I understand you can come out of the Nationwide deals 3 months prior to expiry

Can you clarify what you mean by this? Do you mean that within three months of the end of the deal Nationwide will let you exit the deal and go onto the SVR without paying the ERC? Seems a bit too good to be true.

Money_Maker_Shaker

JayZed wrote: »

Can you clarify what you mean by this? Do you mean that within three months of the end of the deal Nationwide will let you exit the deal and go onto the SVR without paying the ERC? Seems a bit too good to be true.

The email I had from Nationwide on this said;

With effect from Wednesday 21st January 2009 existing fixed rate mortgage borrowers will no longer be able to switch to a new fixed or tracker product more than three months before their deal comes to an end by paying ERCs. Existing tracker customers will no longer be able to switch to a new tracker deal more than three months before the end of their deal by paying ERCs. The switch and fix facility on all Nationwide trackers is unaffected. Existing borrowers who are moving home will still be able to pay their ERCs, redeem their deal early and take a new Nationwide product more than three months before the end of their deal. These fixed and variable rate changes ensure we continue to offer competitive, good value mortgage deals to all our customers, whether they are new customers or existing Nationwide mortgage borrowers coming off deals.