Early Redemption Charges

barge

I would love to take this forward alhtough I know it is not recommended.
I really cannot see how a Accord mortgage company can justify charging me £7300 ERC's when I just changed products with them. I only changed products because I was subject to a mortgage that used the American Libor rate the monthly payments increased from £800 pm to £1300 pm in about 18 months. I changed first to interest only and then to a different product with them. I understand these types of mortgages can no longer be sold.
If you take your business elsewhere it would maybe be more justifiable. Is there anything going on in the background that could help us reclaim these fees.

astreix

The reason you are charged an early redemption penalty is because you get a better introductory rate. If there were no early redemption charges the rate of interest you pay on the mortgage would be higher.

The fact that your payment changed because of change in Libor (which incidentially is not American, but calculated by the British Bankers Association) is down to market factors and is not really relevant to whether ERC should be charged or not. You could have opted for a fixed rate mortgage and reduced volatility in mortgage payment.

barge wrote: »

I understand these types of mortgages can no longer be sold.

Majority of mortgages have an Early redemption charges. FSA guidance on this can be found under the MCOB rules (Rule 12.3) and subject to adhering to these guidelines lenders are allowed to charge ERCs.

I'd also advise you to check your mortgage terms. Most probably they indemnity clause which will mean that if you take this to a court you will end up paying their legal bill.

You might want to have a look at some real life experiences http://www.consumeractiongroup.co.uk/forum/mortgage-companies/62003-important-mortgage-claimants-please.html where people on some forums (not on this website) were encouraged to take lenders to court and they ended up being clobbered with large legal bills.

dunstonh

I really cannot see how a Accord mortgage company can justify charging me £7300 ERC's when I just changed products with them.

Easily justifiable.

I only changed products because I was subject to a mortgage that used the American Libor rate the monthly payments increased from £800 pm to £1300 pm in about 18 months. I changed first to interest only and then to a different product with them.

You made the choices.

I understand these types of mortgages can no longer be sold.

Interest only mortgages can still be sold. However, they have gone back to requiring evidence of ability to repay (such as using a repayment vehicle). They are no longer available for those with poor credit and lack of affordability.

Is there anything going on in the background that could help us reclaim these fees.

No. No-one has and there are no grounds for it to either. If you pull out of the deal that you chose to be in then the lender still has to pay the investors they borrowed the money from on the terms they agreed at the start or pay a penalty for doing so. The fee is understandable and justifiable and its a contract event you agreed to before you took the mortgage out and because of what it covers, it cannot be considered unfair.

klizw

I have had my accord mortgage for 1 year and is on a 2 year deal with them. I understand that redemption penalties are charged to stop customers from abusing the system to switch to cheaper deals all the time. However, my partner has recently lost his job and we can no longer afford the house so we have to sell but obviously we can't afford a 10k redemption charge either!

Does anyone know where we might stand on this? I know people are going to say we knew what we signed up for and yes we did but at that time we both had well paying jobs!

Surely it is unfair of them to charge us this when we would not be switching to a cheaper deal? I don't really think we should have a 10k punishment for bring forced to move out of the house we love when we are already in financial difficulty! They certainly can't say that they have incurred 10 k worth of admin fees in setting up our mortgage!!!!!!!

Please help!

dunstonh

Surely it is unfair of them to charge us this when we would not be switching to a cheaper deal?

Many of the mortgage deals are financed by investors (on a large scale). Investors that will still have to be paid until redemption or have in place a penalty charge to the lender if they repay the money early. If the lender doesnt charge you, then who are they going to charge?

I don't really think we should have a 10k punishment for bring forced to move out of the house we love when we are already in financial difficulty!

I'm sorry but borrowing money is not risk free.

They certainly can't say that they have incurred 10 k worth of admin fees in setting up our mortgage!!!!!!!

No they havent. However they may on early redemption. Hence the fee.

klizw

Are they not subject to fairness laws with the Fsa? How would I find out what charges accord would incur if it was redeemed? I don't believe itwould be as much as £10,000.

dunstonh

Are they not subject to fairness laws with the Fsa?

They are not rules. Fairness is a guideline and ERCs are easily justified. You were quite happy to get the special terms that saved you money. Now you want to get out without paying. Seems you want to have your cake and eat it.

How would I find out what charges accord would incur if it was redeemed?

They have no requirement to supply that information.

klizw

I don't want to have my Cake and eat it at all, my mortgage is a tracker so keeping it for another year would be having my cake and eating it as my montlt payments have reduced by £400 pm and iwould get tostay int house!!!!!!!!.

I do not want to sell my house but if I do then I would be able to pay back the entire mortgage rather than it being reposessed and sold for less at auction. Surely accord could use their common sense to see that they would be worse off that way? But these people don't seem to have brains in their heads, it's like they have pre progrmmed computers instead.

I am by no means saying I wouldn't expect any kind if penalty however, I have yet to see a mortgage product which begins on the variable rate with no tie in period although I am aware they do exist, banks don't advertise these to customers and explain the benefits. The system is clearly designed to abuse vulnerable people like myself.

klizw

Also, how can you say the charges are easily justified then go on to say they are not obliged to provide me with information of charges they would incur, that would be the only way they could possibly justify it if they say that is the reason for the charge, no?

The only other way they justify it is by saying it's to stop people switching to cheaper products which I will not be doing and would sign a disclamer to say this. Anyway, there are no cheaper products than mine on the market.

It seems they are not justifying it as you say, but telling customers something and expecting us to believe them. If they can show they would incur 10k worth of charges then fair enough but in thecurrent climate I am justifiably sinicle about financial institutions and therefore do not believe a thing they say without proof.

Trying_to_be_good

klizw

I can understand that you're frustrated given your situation.

The Early Repayment Charges are not designed to stop people switching to cheaper mortgages, they're designed to hold people to the original term they agreed to with their mortgage deal. The lender has had to source the finance for that period (and the remainder of the term, but then they get to dictate the rate such as a Standard Variable Rate).

Often there are mortgage deals with either lower upfront charges or lower ERCs - these are all priced into the interest rate of the deal. So, it's all part of the pricing of the deal together with the interest rate, and ERCs and arrangement fees are not necessarily directly related to costs incurred.

Do you have payment protection insurance on your mortgage? You may be able to make a claim if the job loss was unforeseen - that's just the sort of circumstance for which the insurance is useful.

_Andy_

klizw wrote: »

Also, how can you say the charges are easily justified then go on to say they are not obliged to provide me with information of charges they would incur, that would be the only way they could possibly justify it if they say that is the reason for the charge, no?

The only other way they justify it is by saying it's to stop people switching to cheaper products which I will not be doing and would sign a disclamer to say this. Anyway, there are no cheaper products than mine on the market.

It seems they are not justifying it as you say, but telling customers something and expecting us to believe them. If they can show they would incur 10k worth of charges then fair enough but in thecurrent climate I am justifiably sinicle about financial institutions and therefore do not believe a thing they say without proof.

1) You didn't have a problem with these charges when you agreed to them.
2) You're confusing the cost of closing the mortgage (you're probably thinking of the admin costs) with the cost of obtaining the funds / money market etc. Dunston has already explained this.