Prepayment penalty on low rate mortgage - can I avoid it?

fleeman

I am currently on a fixed rate 4.29% mortgage with Halifax whose two year special rate expires on 31/Jan/08.

I have been relocated by my work which has changed my circumstances somewhat, and hence, I would like to sell my current residence.

My early repayment charge is 3% of the original loan value, and I would like to know if I have any chance of arguing for the charge to not be enforced.

The main reasoning is that rates have obviously increased significantly, and hence my unwinding the mortgage would in fact make the bank money!

ie they could go out onto the swap market and buy a 1yr swap at probably ~5.5% to hedge their position, therefore making 1.2%.

Therefore, could I argue in this circumstance that enforcing this charge is unfair?

Thoughts anyone?
Fleeman

Robert_Sterling

You signed up for the two year deal which included a penalty for early redemption. No room for arguement about that. Perhaps you could carry the deal over to your next property.

david29dpo

yes. you may be able to port your mortgage to your next house or redeem now and take a new loan within 6 months with the same lender and get it back. if not your stuck with what you signed. not unfair at all.

fleeman

Unfortunately, the relocation is overseas. Hence porting is not an option.

The redemption fees are there to protect the lender from someone unwinding especially in the event of rates going against them significantly. In this situation, it is clearly not the case (given the rate I am unwinding is significantly lower than current rates)

Having said that, I signed up with full awareness of this fee, therefore I knew it was unlikely anything can be done about it. It's a shame really because this relocation was somewhat unexpected.

Cazza

Have you considered keeping the property and asking Halifax for permission to rent it out, for a short period? You could then put it on the market later on in this year so the sale wouln't go through until January next year.

chivers1977

The company I work for, one of the big banks, will pay ERC if you have no choice to redeem along with a huge amount of money on other things, ie removals, mortgage payments, sale fees etc etc etc. If only we had moved offices 25 miles and not 8!!

tigerminxy

Yeah, you should seek relocation expenses if it's work that's relocating you, especially if you're having to go overseas. If your company isn't offering you what's a fairly standard thing, then I'd question if you actually want to work for them.