ERC - From 'fixed' to SVR?

blueberrypie

krisc wrote: »

I was a first-time buyer. What I mean is that I suspect the payment of an ERC only applies for someone wanting to sell-up and pay the mortgage off, or remortgage to pay it off. I don't want to pay off my mortgage yet. I would just rather be on Britannias SVR.

It's an Early *Repayment* Charge. If you're not repaying your mortgage, it's not applicable.

The reason your request has been turned down has nothing to do with the ERC - it's because you are asking for the SVR, which is not a mortgage "product". The SVR is the standard rate that you move onto when your initial period ends - you can't start off on it, or buy your way into it, which is what you've suggested.

Wutang_2

There seems to be lots of confused responses on this thread!!

Its not that complicated - I thought it was quite clear (apart from all the funny men :j - now in my 30's would like to never have to do that again).

ultramagnetic_commuter

I don't understand why you want to do this anyway. You say it'll cost you £1400 and you'll save £800 in a year (which is what you have left on your deal). So it'll cost you more to do what you're suggesting. Or am I missing something?

getmore4less

ultramagnetic_commuter wrote: »

I don't understand why you want to do this anyway. You say it'll cost you £1400 and you'll save £800 in a year (which is what you have left on your deal). So it'll cost you more to do what you're suggesting. Or am I missing something?

Thats what I thought makes no sense at all to even consider this.

Jez-_2

krisc wrote: »

Jez, you have effectively remortgaged!

Well yeah, technically i have. What i am getting at is that this will be the only way for you to effectively change rate and would result in exactly what you are aftter. This is why i then suggested that the reason that you have actually not been able to do this is perhaps because you do not meet the lending criteria for the new product.

Whether the numbers work out is another matter, they dont seem to on the face of it.

krisc_2

ultramagnetic_commuter wrote: »

I don't understand why you want to do this anyway. You say it'll cost you £1400 and you'll save £800 in a year (which is what you have left on your deal). So it'll cost you more to do what you're suggesting. Or am I missing something?

getmore4less wrote: »

Thats what I thought makes no sense at all to even consider this.

My calculated savings of £800 took the £1400 ERC into account!

blueberrypie wrote: »

It's an Early *Repayment* Charge. If you're not repaying your mortgage, it's not applicable.

The reason your request has been turned down has nothing to do with the ERC - it's because you are asking for the SVR, which is not a mortgage "product". The SVR is the standard rate that you move onto when your initial period ends - you can't start off on it, or buy your way into it, which is what you've suggested.

Thanks for this. My phone call to Britannia confirmed what you are saying (as per my earlier post). I know the constituent words of ERC may state the obvious, but the whole point of this money-saving lark is not to take at face-value what financial institutions and retailers tell us. No-one would save any money with that approach.

The thing is, if Britannia allowed me to pay the ERC of £1400 (or PFAFRC - 'Penalty for Abandoning Fixed Rate Charge' if you like!) in order to move on to their SVR, they would only receive £800 less in interest payments from me over the next year (i.e. the difference between my current 5.75% fixed rate payment and their current 4.2% SVR). But they would still have me as a customer - and in my situation, this will probably be for a few years to come as I cannot afford the deposit on the current deals to meet the LTV requirements.

But importantly, Britannia would not know my current financial situaution, so now that I think about this again, perhaps I could threaten to leave them by remortgaging with someone else unless they allow me to go on to their SVR. Perhaps this is a thought for other money-savers out there! I might give this a go.

opinions4u

krisc wrote: »

perhaps I could threaten to leave them by remortgaging with someone else unless they allow me to go on to their SVR. Perhaps this is a thought for other money-savers out there! I might give this a go.

You are missing the realities of the impact of the Credit Cruch.

If you make the threat they will merrily apply your ERC and wave cheerio. They want to reduce the size of their mortgage book. If they can get rid of a high LTV customer like yourself it is good for their business.

1) Lenders don't have the longer term funding in place to support their mortgage books. They want customers to pay off their debts.

2) If they did agree to let you move on to their SVR they would still have pay back their funders on your fixed rate. Why would they want to do this and effectively hand you £800 for doing so?

(EDIT: Looks like I got it wrong , although in my defence I was referring to the mortgage being transferred to the SVR, which it hasn't been!)

ultramagnetic_commuter

krisc wrote: »

My calculated savings of £800 took the £1400 ERC into account!

Ah. I see. It wasn't too clear from your post but I see now (you must have a pretty hefty mortgage).

krisc_2

opinions4u wrote: »

You are missing the realities of the impact of the Credit Cruch.

If you make the threat they will merrily apply your ERC and wave cheerio. They want to reduce the size of their mortgage book. If they can get rid of a high LTV customer like yourself it is good for their business.

1) Lenders don't have the longer term funding in place to support their mortgage books. They want customers to pay off their debts.

2) If they did agree to let you move on to their SVR they would still have pay back their funders on your fixed rate. Why would they want to do this and effectively hand you £800 for doing so?

Well it turns out the above opinion of doom is wrong (disclaimer noted!)! Called Britannia again. I threatened to remortgage with another lender - they didn't apply the ERC and wave cheerio!

Perhaps despite my 'high LTV', they must have thought that my excellent payment history and threat to leave counted for something - they have offered to switch me to another of their products with the payment of the relevant ERC (which is fine!).

The important fact for me (and perhaps other money savers) here is that they are allowing me to switch products even though my LTV is about 90%. I therefore do not have to find the approx £12-23,000 to reduce my LTV to 80-85% which would be required to remortgage with another lender. (This may be in contrast to Jez's experience??.)

I am going to switch to their 3.99% 1-year fixed-rate 'mortgage for existing customers'. Over the course of the next 12 months, this will save me approx £1200 (ERC taken into account) compared to paying the last year of my current 3-year fix of 5.75%.
:money:

uzubairu

Use the savings made to overpay (or save separately) and hopefully reduce your LTV.

You've only got a good fixed rate for a year, so make it count.