Early repayment fees

Feebs

Hello All

Sorry if this has already been asked but I'm interested in people's thoughts.

I understand the difference between Mortgate Exit Fees and Early repayment fees, but wonder if anyone thinks that people who have changed mortgages, and been charged thousands of pounds in early repayment fees for doing so will get the chance to reclaim these fees in the future.

I know that these fees can't be reclaimed at the moment, but what with Bank Charges, Mortgage Exit Fees being reclaimed, it would be great if early repayment fees were deemed to be unfair in the not too distant future.

Myself and my partner were both self employed three years ago and not earning regular or great wages. We managed to get a mortgage but it was a rotten deal and we vowed to get out of it as soon as we had perm jobs as it was so expensive. We switched mortgages last year but were charged over £7,000 in early redemption fees !

Not holding my breath, but would be delighted if there was a case for reclaiming these in the future.

Feebs

Noz

Only time will tell Feebs, though there have been cases lost in court disputing these fees - resulting in even more debt for claimants. We will see...

kingkano

I find it unlikely. MEAFs is because they have changed the AMOUNT after contract, fair dos. Bank charges its because they are not allowed to penalise you but only to charge you their COSTS.

With regards ERCs I think you are agreeing to a contract period, say 5yrs, for which the lender is giving you a special rate compared to their normal one. If you break the contract early, you have agreed to pay them a 'fine' (penalty). Yes they are high because its quite often the difference of the special deal to the normal rates.

For you to be able to turn around and tear the agreement up at anytime with no recourse for them means they will no longer offer special rates. You will be stuck with SVR rates then....

MH233

I would like to think that every set of cirmcumstances for every customer are taken into account and that the banks and lenders either waiver these fees or substantially reduce them as there is no way it costs them thousands of pounds in admin etc! For example, I remortgaged in March 2005 on a fixed rate for 3 years. My deal ends on Feb 2008. At that time, I was a single person living on my own in my flat. 2 1/2 years on I am now getting married next year and moving to what we are calling our 'family home'. I would never have imagined my circumstances would change so dramatically in that time and I have spoken with my mortgage lender who want over £2000 in an early redemption fee and £199 in a discharge fee! I feel, like you, that this is totally unfair as the lender were not offering any incentive to stay with them and their deals were rubbish. I have written to them and will dispute it all the way to get the money back. So far, I have been able to claim an MEAF from another lender and £1000 in bank charges so I will continue to claim and claim and harrass them till they give at least some of it back!!

homer_j_3

I doubt that ERCs will ever make there way into the "claim these back" campaigns that we are seeing at the moment. The reason I believe this is because these fees are not the profit making fees that Joe Public thinks they are.

Lenders are most profitable from all their customers that have their rates on their Standard Variable Rate (SVR). When a lender can offer a special rate like a fixed deal for 2 or 3 years, it will offer this rate with very minimal profit margins to remain competitive. In the ideal world of each lender, they would just offer one rate at SVR as that means they are making profit a lot sooner. However, we work in a world where competition is encouraged and therefore banks need to offer special deals to hook you in.

Unfortunately for us all, the banks are there to make money and believe it or not, banks make almost no money out of 2 year fixed rate deals. It is therefore a science for the lender when they fully price a deal up. They factor in the costs of setting up the deal, administering the deal, the time they need to make a small profit.

So why do they do this if its not that profitable - short answer is because Joe Public can be lazy - they know that a certain amount of people and it is a high % will just not get around to remortgaging and will pay SVR for a while. So whilst its not an exact loss leader, the deal itself is not the profitable bit for the lender.

I would also say that MH's situation is one that can be used as a reason not to tie yourself in for a long period of time. Whilst it was only 3 years, if you are at a point in your life where career changes, increase in family or meeting a potential husband or wife - it can bite you in the bum. Portability should never be relied upon as a safety net for these things.

dunstonh

I know that these fees can't be reclaimed at the moment, but what with Bank Charges, Mortgage Exit Fees being reclaimed, it would be great if early repayment fees were deemed to be unfair in the not too distant future.

They are not unfair though so it's unlikely to happen.

These are a contract event you know about before you sign the contract. They only apply if you break the contract and are there to cover the losses the lender would face by you breaking the contract. In the meantime you have benefited in other ways (such as cashback, discount or fixed rate).

If you took a 4% cashback, dont you think it is fair that you pay an early redemption charge if you redeem the mortgage early? Well a discount rate is the same over the tie in period (it maybe 1% for 4 years) or a fixed rate means the bank buying the money on the money markets at a certain rate. If you redeem early, they still have to pay on the money they have borrowed and they will face fees if they have to pay it back early.