Redemption Penalty - Are They Legal???

Leon_W

Lizzy

I am sorry if you do not like the tone of my posts but I am not one for meandering around an issue with a post ten miles long when the facts can be summed up in a few paragraphs.

The facts ARE simple. If you don't want to be tied in then there are plenty of mortgages available that do not do so. These are priced ABOVE the BOE base rate as the lenders are not charities and need to make a profit. You could, afterall, walk after the first month.

If you are prepared to stay with that lender (and tie yourself) then you will get a better rate, generally UNDER the BOE base rate. A fair deal for those that take the gamble and stay with the lender.

tamadus

You state " Lizzy, among others is taking a risk to pioneer something most of you will be happy to gain from in the future so why knock her down ?"

Wrong, many many people would lose. If customers were free to walk whenever they liked, then all mortgage rates would be comfortably above the BOE base rate for the lender to make a profit. It simply wouldn't be worth there while lending otherwise. Very counterproductive.

You also state "From reading this thread I suspect that most of the negative posts against Lizzy and others following this path are from brokers who see their nice fat fees (which they get for doing nothing an individual can't do themselves)being reduced. I never use a broker, prefering to locate and secure my own mortgage deals. To date every one has been to my advantage."

No skin off my nose. Freedom of choice is what it's all about, if you wish to arrange your mortgage yourself then fine, there are plenty of people who do need our help to try and sort the wheat from the chaff. You just seem to be on a broker knocking exercise (we dont set the early repayment charges, lenders do) and whether a mortgage has these charges or not has no reflection on my "fat fee" as you put it. This has nothing to do with this thread.

I respect the fact that people can have a different view to mine and welcome all posts on the subject. That's what these boards are all about, so please don't take offence as none is meant.

AndrewSmith

Fat fee of average £350 per £100,000 mortgage ?

:rotfl: :rotfl: :rotfl:

I suppose it depends on what some people consider their own worth to be doesn't it?

tamadus

AndrewSmith wrote:

At the end of the day.

The redemption penalties are clearly indicated on the mortgage offer. You are happy to take the incentive rate so therefore be happy to accept the penalties should you want to 'jump ship' within the incentive period.

Lower rates are available purely because there are redemption penalties attached to discourage the borrower from leaving before the period ends. The product and rate are priced on the basis of the borrower remaining for the term of the incentive.

If you don't like the penalty then don't take the rate. Simple.

Everyone is always being pushed to go for the cheapeest rate. well Im afraid that you get nothing for nothing in this world. Like it or lump it. Ye you can have a cheaper rate but it will come at the cost of haviing to stay with that lender/product for the incentive term. I think that's a fair deal.

Its not a question of the board being populated by brokers etc. We are allowed our say as consumers just like everyone else. What the brokers and bank employees can offer is factual information based on what the likely outcome will be without patronising everyone by trying to sucker them into some fruitless campaign to reclaim redemption penalties that they agreed to in the first place, all in the name of awareness of the cause.

Whether there is 1 day or 100 days left on the incentive rate, if the penalty is applicable then it must be paid. The borrower will have signed their agreement to the penalties and the rate at the time of completion. If the borrowers are stupid enough not to read thoroughly a legally binding contract such as a mortgage offer before signing their agreement to it's terms an conditions then they have only themselves to blame.

Bank charges are clearly stated in terms and conditions when you chose your bank but your now happy to reclaim them on the basis they are unlawful despite having agreed to them. As a result it's very likely that banks are going to charge everyone (including those who never incur those charges) yet that is ok with you because you got your charges back.

Just because we agreed to the charges in whatever name they come doesnt make them lawful. If your happy to pay unlawful charges then go ahead, your the one that will lose out while they make indecent profits from you. But please don't attack those who oppose the unlawful regime of charges simply because they choose to speak out against them.

Where would women be now if the suffragettes hadn't spoken out ?

Now that brokers see their fees being curtailed as a possibility then the charges are suddenly ok. Please dont give me that old attitude of I'm ok and *** you. The banks and Building societies have flouted the law for long enough. we are all covered by the laws of this land and that includes them.

I have seen the financial services industry from the inside, I know all the little tricks and one thing always remains in my mind from that experience. Customers best Interest.

Your attitude is hypocritical in the extreme. I wonder if that attitude would change if bank charges caused you to fall into that spiral of debt and lose your home? Before you question my motives, no I haven't lost my home and neither am I in that spiral. I pay my way in this world but I will not lie down and be intimidated because some bank CEO wants a bigger profit margin to boost his salary at my expense.

For those who think mortgages will increase in cost because of successful claims, that hasn't stopped you causing banking to increase in cost by making claims. These things will only increase if the consumer continues to accept the banks one sided arguments.

I recently called a credit card company and told them I wanted a reduction in the interest they charge, when they said no I told them I wanted to close my account. They suddenly cut 2% off the interest rate.

I repeat if you disagree with the banks and building society unlawfully making a profit through penalties (by whatever name they choose to call it, overlimit fee or early redemption charge) at your expense then stand up and argue the case, otherwise if you defend it then your no different to them IMHO.

AndrewSmith

tamadus wrote:

Now that brokers see their fees being curtailed as a possibility then the charges are suddenly ok. Please dont give me that old attitude of I'm ok and *** you. The banks and Building societies have flouted the law for long enough. we are all covered by the laws of this land and that includes them.

Fees are not being curtailed. Broker business is extremely profitable to lending organisations which is why it is on the increase. Redemption penalties have no corolation with broker fees whatsoever.

You would know this if you have truly 'seen it from the inside' as you say.

Nobody is saying fees are OK. Read the entire thread and you will see. What I am saying is that people should red declarations before signing them, then there would not be this whole issue.

All that will be achieved by such action is the eventual increase in interest rates across the board, just because some want to have their cake and eat it.

Well done :T

Leon_W

tamadus

I don't think anyone would argue against hidden fees, small print, jargon etc etc ,but when things are spelled out in clear English with charges laid out in full view for everyone to understand then where is the problem ? If you don't like it go and find a mortgage without them, they are available you know.

tamadus

Leon_W wrote:

Lizzy

I am sorry if you do not like the tone of my posts but I am not one for meandering around an issue with a post ten miles long when the facts can be summed up in a few paragraphs.

The facts ARE simple. If you don't want to be tied in then there are plenty of mortgages available that do not do so. These are priced ABOVE the BOE base rate as the lenders are not charities and need to make a profit. You could, afterall, walk after the first month.

If you are prepared to stay with that lender (and tie yourself) then you will get a better rate, generally UNDER the BOE base rate. A fair deal for those that take the gamble and stay with the lender.

tamadus

You state " Lizzy, among others is taking a risk to pioneer something most of you will be happy to gain from in the future so why knock her down ?"

Wrong, many many people would lose. If customers were free to walk whenever they liked, then all mortgage rates would be comfortably above the BOE base rate for the lender to make a profit. It simply wouldn't be worth there while lending otherwise. Very counterproductive.

You also state "From reading this thread I suspect that most of the negative posts against Lizzy and others following this path are from brokers who see their nice fat fees (which they get for doing nothing an individual can't do themselves)being reduced. I never use a broker, prefering to locate and secure my own mortgage deals. To date every one has been to my advantage."

No skin off my nose. Freedom of choice is what it's all about, if you wish to arrange your mortgage yourself then fine, there are plenty of people who do need our help to try and sort the wheat from the chaff. You just seem to be on a broker knocking exercise (we dont set the early repayment charges, lenders do) and whether a mortgage has these charges or not has no reflection on my "fat fee" as you put it. This has nothing to do with this thread.

I respect the fact that people can have a different view to mine and welcome all posts on the subject. That's what these boards are all about, so please don't take offence as none is meant.

No offence taken and none intended. But it does annoy me when I personally know brokers who charge £5-600 to arrange a mortgage and then get a commission payment from the lender on top. A commission payment that is taken from the costs to the customer. Some brokers have even told me they stand to lose their commission fees if claims become the norm and are upheld.

It also annoys me to see people being knocked for standing up for their LEGAL rights of challenge to these fees. At the end of the day both the OFT and the Court of Appeal have upheld these charges to be unlawful yet we still accept the banks word for it.

I'll remind you all of the comment made by the OFT in their repot on credit cards.

"A term in a mortgage agreement which requires the borrower to pay more for breaching the contract terms than actual costs and losses caused to the lender by the breach (or a genuine pre-estimate of that) is likely to be regarded as an unfair penalty and to be unenforceable both at common law and (in a consumer mortgage) under the Unfair Terms in Consumer Contracts Regulations. A redemption charge may be regarded as a penalty even if it is expressed as the price for exercising a right rather than a consequence of breaking the agreement."

My post isn't intended as a broker knocking campaign, I may not need your service but some people always do. My post was more concerned with defending people like Lizzy who are prepaired to stand up for their rights and are getting slatted for that by what mostly appears to be brokers.

At the end of the day it's up to the courts to decide these matters, if they say the ERC's are unlawful then we all have to accept that. I take my hat off to those who are ready to challenge the mortgage companies to get that court decision.

tamadus

AndrewSmith wrote:

Fees are not being curtailed. Broker business is extremely profitable to lending organisations which is why it is on the increase. Redemption penalties have no corolation with broker fees whatsoever.

Agrered it is profitable which is why they pay such high commissions.

You would know this if you have truly 'seen it from the inside' as you say.

Nobody is saying fees are OK. Read the entire thread and you will see. What I am saying is that people should red declarations before signing them, then there would not be this whole issue.

I have read the entire thread, did you sign and agree to your bank making penalty charges against you for breaches ? Have you made a claim for them to refund those same charges, which are clearly spelt out in the terms and conditions.

All that will be achieved by such action is the eventual increase in interest rates across the board, just because some want to have their cake and eat it.

Same thing with bank charges if we allow it to happen, but I dont see you advocating we should pay those charges as well.

Well done :T

The argument still comes back to the charges being unlawful and if we, the consumers are happy for the companies to continue flouting the law.

AndrewSmith

tamadus wrote:

No offence taken and none intended. But it does annoy me when I personally know brokers who charge £5-600 to arrange a mortgage and then get a commission payment from the lender on top. A commission payment that is taken from the costs to the customer. Some brokers have even told me they stand to lose their commission fees if claims become the norm and are upheld.

You have been told complete nonsense. The commission cost is in no way passed on to the customer. If that were the case brokers would not have access to cheaper poducts than the lending branches themselves have. Brokers offer the same if not better rates than are available via the branch network. If the commission cost were passed on the the customer then the rates available to brokers would be more expensive or have higher fees, which they dont.

Lenders will not stop or reduce the commission payable to brokers as if they did, the business stream would stop. That simple.

Also the commissions are not 'huge' The amount of work involved with brokering a mortgage is well worth the 0.35% average paid by the lender.

tamadus

Leon_W wrote:

tamadus

I don't think anyone would argue against hidden fees, small print, jargon etc etc ,but when things are spelled out in clear English with charges laid out in full view for everyone to understand then where is the problem ? If you don't like it go and find a mortgage without them, they are available you know.

Leon, It doesnt matter if the charge is hidden in small print or on the title page in bold print the courts have still handed down judgements for 100 years that they are unlawful. If you dont like your bank making the charge then what is the difference with your building society. The LAW still applies and will apply until such time as a bank or building society stand up in court and openly justify the charge, which they won't do because by their own admission they would lose.

The banks spelt out their charges in the terms and conditions which we all signed as having read and agreed but the charge (and hence the terms and conditions) is still unlawful under the UTCC.

tamadus

AndrewSmith wrote:

You have been told complete nonsense. The commission cost is in no way passed on to the customer. If that were the case brokers would not have access to cheaper poducts than the lending branches themselves have. Brokers offer the same if not better rates than are available via the branch network. If the commission cost were passed on the the customer then the rates available to brokers would be more expensive or have higher fees, which they dont.

Lenders will not stop or reduce the commission payable to brokers as if they did, the business stream would stop. That simple.

Also the commissions are not 'huge' The amount of work involved with brokering a mortgage is well worth the 0.35% average paid by the lender.

LMAO now lets do some simple maths here. assume a £100,000 mortgage at 0.35% that gives £350 for basically doing a search of lenders and filling a form in. Now where do we think that money comes from? is it something that appears by magic? Noooooo it's passed onto the customer, by virtue of very simple economics. I also know that a broker will usually handle any insurance needed and commision on that is a lot higher.

Brokers get slightly better (but not always) deals because its cheaper to pay them a commission than to maintain branch offices with large overheads. I actually got a better deal on my last mortgage than a broker friend could find, and I got it with no ERC.

Sorry your trying to defend the undefendable against somebody that has seen the inside and I have far better things to do.