Redemption Penalty - Are They Legal???

AndrewSmith

Now I am the one laughing.

You really are laughable if you are trying to say that you have inside experience of the industry and that brokering a mortgage involves nothing more than simply filling out a form. If that is your experience of mortgage brokering then let us all hope that you no longer have any involvement in the industry whatsoever.

Your arguments are flawed, your information incorrect and your 'facts' are nothing more than ridiculous.

You seem to forget that you ar posting on a forum where there are people who will have a far better understanding of how the mortgage/brokering/commission system works than you do.

All that you are achieving here is making yourself look very silly by posting such rubbish that, to anyone who actually knows anything about the industry, is completely laughable and is providing untold entertainment.

tamadus

AndrewSmith wrote:

Now I am the one laughing.

You really are laughable if you are trying to say that you have inside experience of the industry and that brokering a mortgage involves nothing more than simply filling out a form. If that is your experience of mortgage brokering then let us all hope that you no longer have any involvement in the industry whatsoever.

Your arguments are flawed, your information incorrect and your 'facts' are nothing more than ridiculous.

You seem to forget that you ar posting on a forum where there are people who will have a far better understanding of how the mortgage/brokering/commission system works than you do.

All that you are achieving here is making yourself look very silly by posting such rubbish that, to anyone who actually knows anything about the industry, is completely laughable and is providing untold entertainment.

And you seem to forget that there are people much more qualified in unlawful charges than you. You have a biased attitude which is very obvious.

I don't see you claiming that bank charges are lawful and should be paid, so I assume you have made a claim for them. So why try and prevent people making a claim for ERC'S on the same logic of being unlawful. They are unlawful and people are claiming them back with success. Your attempting, badly, to say the OFT and the courts are totally wrong just because your personally involved in the industry. From your posts you dont follow the principle of customers best interest.

Your argument are based on bias as you KNOW your fees and commissions are under threat. Just like the banks have tried and failed to convince the public of their stance you too are failing.

I did not come here to start a flame war or to justify myself to somebody with flawed logic based on personal bias.

I wont respond to any more posts by you

AndrewSmith

tamadus wrote:

And you seem to forget that there are people much more qualified in unlawful charges than you. You have a biased attitude which is very obvious.

:rotfl:

Your argument are based on bias as you KNOW your fees and commissions are under threat. Just like the banks have tried and failed to convince the public of their stance you too are failing.

Again, completely incorrect and ridiculous :rotfl:

I did not come here to start a flame war or to justify myself to somebody with flawed logic based on personal bias.

No, you have come to post incorrect information then blame everyone else when it is shown as incorrect.

I wont respond to any more posts by you

Oh please do, I was beginning to enjoy myself

Mark7799

I have only discovered this thread today and am amazed at some of the comments expressed on it.

I consider I have a reasonable knowledge of financial products and am aware of the risks of taking out fixed rate mortgages - I usually try and have a fixed rate mortgage that last around 2 - 3 years - any more and you can be tieing yourself up for a long time and things can change a lot in a long time.

I like fixed rate mortgages for the certainty they provide in budgeting but always check the pitfalls and what is expected of me if I didn't keep to my side of the bargain. Having now found that some people are claiming back their early repayment charges, will this mean the end of fixed rate mortgages? If so, how will this help the consumer? There are plenty of other mortgage deals without early settlement penalties available - if you don't want to run the risk of incurring ERC's why take a fixed rate mortgage?

Leon_W

Exactly Mark 7799.

Hooray ! Someone with a bit of sense.

Banks are not charities and do their sums very carefully. I have incurred no bank charges whatsoever for 15 years. How ? By running my account correctly.

If you have incurred bank charges (whether "unlawful" or not) then, quite frankly, that is your look out. I'm not subsidising those without a grip on their own finances.

Like a lot of people, I've got a fixed rate mortgage comfortably under the BOE base rate. IF ERC were somehow "unlawful" (which I seriously doubt) then this will simply push up the costs of these products for everybody else who can read and understand pretty basic conditions of a mortgage (the vast majority).

Who shall I claim against for that tamadus ?

HSBCrusher

regularsaver1 wrote:

Birmingham midshires often help people who can't get a mainstream mortgage - so an early repayment charge is understandable as they have a higher risk.

Is it?

The fees do not just cover costs, they make the bank profit.

Make profit out of those who can least afford it.

HSBCrusher

Leon_W wrote:

Exactly Mark 7799.

Hooray ! Someone with a bit of sense.

Banks are not charities and do their sums very carefully. I have incurred no bank charges whatsoever for 15 years. How ? By running my account correctly.

If you have incurred bank charges (whether "unlawful" or not) then, quite frankly, that is your look out. I'm not subsidising those without a grip on their own finances.

Like a lot of people, I've got a fixed rate mortgage comfortably under the BOE base rate. IF ERC were somehow "unlawful" (which I seriously doubt) then this will simply push up the costs of these products for everybody else who can read and understand pretty basic conditions of a mortgage (the vast majority).

Who shall I claim against for that tamadus ?

Thats fine if you are working, on a reasonable income, going on fine.
What happens when a fault not of your making happens?
This week due to an error by my employer, my wages were not paid in.
By the time I got a letter from my bank telling me about it (a few days) £160 had been taken. OK, I could cover that, pay in some, but it was all swallowed up in these charges.
What if I was on benefits on a fixed income????
I would be stuffed completley, as I am now £160 down. Then come more charges.
A downward spiral.
You cannot get out of it, and that isn't your fault.

A redemption fee is profit, if it reflected actual costs, then no problem.
This is greed, pure and simple, and profiting from those who can least afford it.

jamesd

tamadus, you can identify the mortgage brokers by their signatures. They are required to use them. No signature = consumer, or at least not broker.

Please read A Study of Mortgage Repayment Risk (PDF) and tell me how you think the mortgage lenders offering fixed rates should cover their risk for offering a fixed rate mortgage, the one consumers who take a fixed rate mortgage are passing on to them to manage, so the consumer doesn't have to accept the chance of a large increase in monthly payments.

The reason I'm asking you to do this is that at present you don't appear to be distinguishing between unlawful charges and the costs of having an uncovered interest rate futures arrangement when the other part of the deal - the consumer - walks away.

If you want to see what the basic cost of a mortgage is, take a look at the lifetime tracker rates. There's no messing about with interest rate futures or low start (discounted initial) monthly payments in them, just the plain mortgage contract.

milletme, yours is a good example of a charge which appears to be partly unlawful, because the loss to the lender does depend on the time you've had the mortgage. Chances are that only about 1/2 or 2/3 of that really reflected their loss if it was a fixed rate deal. One lender recently changed from stepped rates - decreasing each year - to the same rate for all years, less than it had been in the first year, more in the last. Their argument was that it was simpler to understand. Maybe. But it was also unwise, I think, because it creates situations where it's obviously wrong. I don't recall any of the brokers who commented on it thinking it was a good idea.

thepcsaysno

we have a variable rate with derbyshire homeloans (6.73%) making payments of £725 a month on £130000 interest only. How can they justify a £4000 redemption fee as we have already paid over the odds in interest???

jamesd

Mark7799 wrote:

I like fixed rate mortgages for the certainty they provide in budgeting but always check the pitfalls and what is expected of me if I didn't keep to my side of the bargain. Having now found that some people are claiming back their early repayment charges, will this mean the end of fixed rate mortgages? If so, how will this help the consumer? There are plenty of other mortgage deals without early settlement penalties available - if you don't want to run the risk of incurring ERC's why take a fixed rate mortgage?

They won't have to go away. There are three ways to pay for the futures option if interest rates fall instead of rise (the case where consumers can get a cheaper deal if they break the contract, but the money can't just be relent to a new consumer without a loss, because it cost more than a new consumer would be willing to pay):

1. A higher initial charge.
2. Higher fixed rate interest rates.
3. Charging those who leave early.

It's 3 that is threatened if people and courts don't distinguish between penalty charges and costs of a loss. The other two methods will remain and mortgage companies would have to switch to them instead. Net result: those who stick to the deal are forced to subsidise those who break it and everyone ends up paying either higher interest rates, higher intial charges or both.

If interest rates rise life is much easier for the mortgage company since they can just relend the money without losing much - the money cost less than the then-current interest rates so they can reuse it in another mortgage. Their loss then is their new customer acquisition cost and mortgage setup charges for that replacement consumer. Charging the same ERC in this case as in the decreased rates case is crazy, I think, because it definitely doesn't represent the true cost. Anyone charged the same ERC when rates rise as when they fall should be able to win a court case and get a reduction, since the studies do support their case.

HSBCrusher, what does your employment contract say about when your employer was required to pay you? Did they break that contract? If so, please do take them to court if they refuse to pay. It's their responsibility and they shouldn't be making you cover the cost of their mistake. If they didn't break the contract and instead they paid when they could and you just assumed it would be paid as usual... then it was you who screwed up and get to pay the reasonable charges the bank made. Not the unreasonable part, if any.

thepcsaysno wrote:

we have a variable rate with derbyshire homeloans (6.73%) making payments of £725 a month on £130000 interest only. How can they justify a £4000 redemption fee as we have already paid over the odds in interest???

Can't tell yet. What was the original mortgage deal? Did you get reduced payments for a while in exchange for agreeing to pay standard variable rate (SVR) for a while? Deferred payment deals like that are usually how you end up with SVR and an early repayment charge. If you're really close to the end of your mortgage term it's probably unfair and should probably be lower. If you're only just after the end of the discount time, it's probably fair, because all you're doing is repaying the deferred costs and most of them haven't been paid yet.