Mortgage Early Redemption charges

pt1

jmf1 wrote:

I recently closed a fixed rate/term NR mortgage early and was charged more than £7000. I have argued with them including writing to the Chief Exec but have got nowhere. Any advice?

i currently trying to get my ERC from NR, but they are are trying to bamboozle me with legal jargon.

how are yoiu getting on

regularsaver1

That is a good response to them with clear explanation. Could you not have repaid the mortgage over 3 weeks later?

kingpro

That is a good response to them with clear explanation. Could you not have repaid the mortgage over 3 weeks later?

No, we had to move when we did to ensure we got the next property. So, we sold our house and completed 3 weeks before the mortgage end date. I find it strange that I was not allowed to pay the final 3 weeks in advance! surely this is not fair, as if I paid the amount in advance then I would of still been around £1000.00 better off?

Does anyone know what I can do to reply to IF's letter as they are not having this at all!;)

oldwiring

kingpro wrote:

No, we had to move when we did to ensure we got the next property. So, we sold our house and completed 3 weeks before the mortgage end date. I find it strange that I was not allowed to pay the final 3 weeks in advance! surely this is not fair, as if I paid the amount in advance then I would of still been around £1000.00 better off?

Does anyone know what I can do to reply to IF's letter as they are not having this at all!;)

TBH I think that IF are justified in their response. No lender can be held responsible for decisions made by their client outside their control. You made a decision to repay early to secure the purchase of the new property. That decision brought along with it costs to you. If you had made the choice to delay completion and thereby lose the property you would have incurred costs as well, such as abortive survey and solicitor's fees. Either way you would have incurred considerable costs.

BTW there may have been another way for you, but in absence of the amount of the purchase and base rate at the time it cannot be judged if that would have been better for you. For that I am assuming you had exchanged contracts and had a completion date for your sale property. A closed bridging loan for such a transaction as that would have cost (using Lloyds TSB current info) cost a 0.5% arrangement fee and BR+1% p.a. interest. A the now base rate that would have cost you in region of £2470

kingpro

There reply is not justified. How can their charges be in excess of £2000 three weeks before the end of the deal and then 0 thereafter? The charges stated are not justified. Also, the penalty charge (ERC) is not justified full stop - I've written a response based on the ERC being a penalty and that IF were not prepared to negotiate at all with regards to these 3 weeks including paying the interest in advance.

oldwiring

kingpro wrote:

There reply is not justified. How can their charges be in excess of £2000 three weeks before the end of the deal and then 0 thereafter? The charges stated are not justified. Also, the penalty charge (ERC) is not justified full stop - I've written a response based on the ERC being a penalty and that IF were not prepared to negotiate at all with regards to these 3 weeks including paying the interest in advance.

I read their reply nad they will have lost money as they could have lent at a higher rate and also lenders try to match their liabilities and assets; that is why the early redemption charges are put in place. At one time they were far more stringent than now, and I think you will find that the FSA did step in to curb them. In fact a larger charge would have been permiisible under the regs

In theory, we believe that an early repayment charge of 3% would have been permissible under the regulations.

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regularsaver1

Yeah they have explained how they lost money due to you redeeming your mortgage early

could you have not said to your buyer - or who you were buying from - that you would be charged this early repayment charge , can you not delay it for 3 weeks?

desmonds

http://www.mortgagevictims.co.uk/fixed-rate-mortgage-penalties.htm

Take out a fixed rate mortgage and - if you want to repay it early, you may be faced with a penalty.

The Office of Fair Trading has decided that some penalty clauses are so severe as to be "Unfair". This makes them unenforceable.

These clauses can fall foul of the Unfair Terms in Contracts Regulations. The lender must be able to explain how much the early redemption costs them - and the penalty must be proportionate.

First, complain to the lender - ask them to justify the penalty in these terms. If you are not satisfied, request a deadlock letter and complain to the Ombudsman


Desmonds

oldwiring

I think you may finf that some charges were reviewed a while ago and limits were set. The recent article that I posted a link to in another threas were more to do with unexpected or considerably raised charges for dealing with the discharging or redemtion of a mortgsge.