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should erps be banned?

ninky_2
Posts: 5,872 Forumite
what is the point of early redemption penalties other than to keep people in debt longer and therefore screw them for more interest? why on earth are they allowed? surely any loan should be allowed to be settled in full at any time. anything else is immoral and should be illegal.
Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves. - Lord Byron
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what is the point of early redemption penalties other than to keep people in debt longer and therefore screw them for more interest?
You really dont have a clue do you. Rather than making daft accusations, why not find out why.why on earth are they allowed?
They allow the deals to be offered. Without them there would be virtually no deals offered.surely any loan should be allowed to be settled in full at any time.
And it can. However, if you take on a special deal then you have to repay the costs of taking on that deal.anything else is immoral and should be illegal.
So, who is going to repay the investors and savers who have put their money up to finance the mortgages at those special rates?I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
So, who is going to repay the investors and savers who have put their money up to finance the mortgages at those special rates?
why do they need repaying? they've not lost money have they? unless the loan has been completely free up to that point. where are these loan deals that are so great that if they were allowed to be settled in full they would create a loss?Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves. - Lord Byron0 -
I suggest you do some reading up about mortgage funding.
In the meantime if you want the flexibility to end the mortgage early without charges then choose a product accordingly.
Your signature states you are aiming to close your mortgage in three years so I fail to see how ERCs would affect you, assuming you don't have a 10 or 25 year fixed rate anyway.0 -
why do they need repaying? they've not lost money have they?unless the loan has been completely free up to that point.
Where do you think the money comes from that is lent to you?where are these loan deals that are so great that if they were allowed to be settled in full they would create a loss?I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
What would you propose as an alternative by the way?
No ERCs but presumably you'd be more than happy with significantly higher interest rates all round?0 -
what is the point of early redemption penalties other than to keep people in debt longer and therefore screw them for more interest? why on earth are they allowed? surely any loan should be allowed to be settled in full at any time. anything else is immoral and should be illegal.
I am always doing this - thinking, AFTER I make a comment. Nightmare! Its ok Ninko we all make mistakes.Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0 -
What would you propose as an alternative by the way?
No ERCs but presumably you'd be more than happy with significantly higher interest rates all round?
i did choose a product accordingly and am on flexible mortgage with no penalty for overpayments that tracks the baserate +0.49. yet to think this issue doesn't affect me is wrong. no man is an island and all that.
my attitude to mortgages is they shouldn't exist at all but i realise that's far too radical for the majority on this board. combine an absence of lending with other economic policies and we could all have a much better quality of life. but for starters i'd be happy with the removal of early redemption. btw where are these really great loans that they have lead to? my mortgage doesn't have them and the rate seems better than many others. are you suggesting the lenders gave it to me as a charitable donation? jolly kind.Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves. - Lord Byron0 -
They need repaying as they have funded the mortgage and the terms of the deal is based on that funding. If you repay the mortgage, the investors/savers still have to be paid.
Where do you think the money comes from that is lent to you?
Fixed rates, discounts, cashbacks, some trackers even.
where does the money come from that is lent to us? that's easy. debt.
can you give me a link to an actual loan / mortgage that is only profitable because of the erps and not a vague generalization about types of product?Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves. - Lord Byron0 -
The lesson you should have learned at your mother's knee is that nothing in this life is for free!
I agree with the above comments, if you enter a deal then you know the terms stated up front, you buy into them and that is the way it is. In this system that we operate in now the client is more informed at every stage than ever before.
Expecting lenders to lend for lending sake .......I am a Mortgage Adviser
You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
where does the money come from that is lent to us? that's easy. debt.
can you give me a link to an actual loan / mortgage that is only profitable because of the erps and not a vague generalization about types of product?
Lets try a thought experiment.
Lets say you put £10,000 savings into Nationwide into a Fixed Rate bond at 6% interest fixed for 5 years. What do Nationwide do with that money? They lend it out, probably in fixed rate mortgages.
How would you feel if 2 years into your fixed rate savings deal interest rates had fallen by 2 or 3% and Nationwide sent you a cheque for your £10,000 + the interest to date. They just didnt fancy honouring the rest of the 5 yr fixed term on the bond as it was more profitable for them to give you your money back and effectively borrow it from someone else instead through a fixed rate savings bond at 3%.
What you are proposing should be enforced is the reverse of this. You want to be able to get any deal, such as a fixed rate, but be able to repay it whenever you want without penalties. The result of such rules would be drastically reduced choice (fixed rates would be much less available), and what products remain especially those at fixed rates would be priced much higher to reflect the "one way bet" you as a customer are taking. i.e. if rates fall you will ditch the deal, but if they rise the mortgage lender has to suck it up.0
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