ERCs- Early Repayment Charges - early exit fees. (merged).

mikoto

citrine wrote: »

hi just a quick question..

i bought a new house not 18mnths ago and wanted to move my mortage with my mortage provider as i was happy with them, i,d only had the mortage with that mortage provider for 12 mnths.

when i spoke with them they refused to give me the mortage as they said they did not mortage to homes on a high street,.. we argued that we are not on a high street but are next to one shop but they wouldnt have it so we had to seek a new mortage provider (either that or not move home)

unfortunatly because we had no choice but to change the mortage provider and we were charged nearly 3k in various charges and clawbacks...

we felt very shortchanged and held to ransom by this mortage provider, is there any thing i can do to reclaim any of the moneys...

get a lawyer.

MarkyMarkD

A lawyer won't get them anywhere.

Lenders are not obliged to lend. If your proposed new home does not meet their lending criteria, then they won't lend on it.

And if they won't lend, because of their lending policy (or, indeed, because your credit rating or income or whatever doesn't meet their current requirements) then they will not waive your Early Repayment Charge. Otherwise, everyone who wanted to avoid their ERC would simply pretend they wanted to buy a 25th floor flat in a council block, which hardly any lender would lend on.

MarkyMarkD

aqueoushumour01 wrote: »

looking to choose between some mortgage options and im slightly confused with ERCs. If we assume a 5yr fixed deal for £100,000 mortgage and the mortgage has an ERC of 3% of the loan for the first 3 years and 2% for the last two years of the fixed rate period. If we say I decide I have to move after one year. Do I pay only 3% of £100,000 i.e. £3,000 and that's the charge?

Or, do I pay 3% of £100k for the second year, 3% of the £100k for the third year, 2% of £100k for the fourth year and 2% of the £100k for the fith year so £10k in total i.e. pay ERCs in each year of the mortgage term I do not see out?

Any help would be much appreciated.

The first answer. £3,000 in total if you redeem during the first 3 years and £2,000 in total if you redeem during the 4th or 5th years.

malchish

In regard to ERC,
It is interesting that some members here (very few of them) try their hardest to persuade us that those charges are "legal and reasonable". Those people have throusands of posts behind them - it looks like someone from the side of lenders is very keen to have posters who will fob off any thoughts by any of us about "unfair terms of contract"!!! Remember, paid posters do exist...
What exactly was that legal case where the banks won? Can we have details? names?
Unfair contract term is any term that is organised in such a way as to exceed any reasonably foreseeable losses that one party may have as a result of the other party exercising their contractural right. If an ERC is 3% for a 2year fix, it cannot be reaonable, because on the first day of 2years, and on the last day of those 2 years the lender will lose very different amount of money. Any reasonable charge should be decreasing!
Any contract that is worded like: "You have a right to park here after expiry of your ticket, and we then will charge you £500000000 for every minute" will be deemed unfair.
A contract worded like "if you repay your mortgage a day earlier than 5 years you have been with us, we will charge you 5%, the same as if you repay on the very first day of the mortgage" is equally unfair!!!!!
There has been NO no court case where a non-decreasing ERC was approved as fair contract term. Dear paid posters, who represent the opinions and wishes of lenders, please do not keep persuading us to get scared and to never try to defend our rights.

MarkyMarkD

Ho ho. Most amusing to suggest that I (or others on this thread) am a "paid poster". I wish I was, in fact!

In common with many consumer issues, there are not necessarily legal precedents (in either direction) in the public domain.

Also in common with many consumer issues, any claim for the repayment of Early Repayment Charges would require the complainant to institute legal action against the lender, rather than the other way around - because the borrower will not be able to redeem their mortgage without paying the ERC, and therefore will be unable to sell their property (normally the reason they wish to redeem the mortgage).

If there was a reasonable prospect of success in such a legal case, presumably there would be a history of such successful court cases. But there isn't.

I totally agree with malchish that, prima facie, a non-decreasing ERC is unlikely to represent a reasonable pre-estimate of the losses caused by early redemption. Indeed, I've made the same point in previous posts. But, and it's a big but, the change from actuarially-calculated ERCs, based exactly on the loss to the lender, to non-decreasing ERCs expressed as a fixed percentage of the balance, is something which occurred as a result of previous consumer-led rejection of "non-transparent" ERCs.

These "non-transparent" ERCs were, sometimes, very large amounts (up to 25% of the balance, if I recall) which genuinely represented the loss to the lender following the early redemption of mortgages. The replacement of these ERCs with simple-to-understand, level percentage of balance, ERCs was a consumer benefit - at a cost to the lenders - and scarcely something to be criticised.

In the current environment, almost every ERC paid will involve the lender losing money. This is because the ERCs are typically 3% (amongst prime lenders) and the borrowers will typically have more than a year outstanding, whilst rates have fallen more than 3%.

Obviously there are marginal cases where there is one day, or one month, left to go on the ERC and the loss to the consumer (the ERC) is more than the amount they can possibly save.

But in the vast majority of cases, the ERC is a bargain.

The FOS has an information page on this subject, http://www.financial-ombudsman.org.uk/publications/technical_notes/mortgages-early-repayment-charges.html, and specifies that it is legitimate for a lender to price a non-decreasing ERC on a product, or portfolio, basis. In other words, it's OK to have a non-decreasing ERC, as long as the average amount actually paid by borrowers reflects the average loss incurred by the lender.

On that basis, the ERCs in most mortgage contracts are not unfair terms.

Given that this is FOS's expressed view, they are not going to uphold complaints against fairly-disclosed ERCs.

And the courts are unlikely to go against FOS's expressed view, although of course in individual cases they may do so as judges do not necessarily rule in a rational way.

So, if you aren't happy with your ERC, you may complain to FOS. And you'll probably lose. And you may go to court, but you'll probably lose.

It's your court costs, and your gamble.

dunstonh

It is interesting that some members here (very few of them) try their hardest to persuade us that those charges are "legal and reasonable".

Please provide evidence to suggests they are not.

If an ERC is 3% for a 2year fix, it cannot be reaonable, because on the first day of 2years, and on the last day of those 2 years the lender will lose very different amount of money.

How do you know that? What if the lender has financed the deal where they have to pay a fixed penalty irrespective of when the money is paid (if early)

There has been NO no court case where a non-decreasing ERC was approved as fair contract term.

There has been no case where it hasnt been either.

Dear paid posters, who represent the opinions and wishes of lenders, please do not keep persuading us to get scared and to never try to defend our rights.

Pathetic.

malchish

Who are you, the posters who are so desperately keen to state how "legal and reasonalbe" ERC are? Are you consumers? What relation do you have to mortgage lenders? Are you forum addicts then, if you, unpaid, some of you have 40 000 posts in several years (it would be a full time work to post here, 40000posts in 2000 days means roughly 20 posts a day, no holidays!)
Which exactly court case do you know that judged ERC as not unfair?
What "beneficial rate" do you talk about, when Bank of England rate is 0.5 %, but fixed mortgages were given at as high as 5.99%! This is not a bargain, but unfair profeteering!
I have well read Ombudsman advice, and this website makes very clear that any ERC that DOES NOT REASONABLY EXTIMATES LOSS WILL BE DEEMED UNFAIR. No, a consumer who applies to Ombudsman will PROBABLY WIN, and a legal action will be even more efficient, but it must be done with a good lawyer. Settlement will be most likely achieve. If you are aware of a single legal case where the consumer lost against a mortgage lender about ERC in the absense of arrears, please provide the case number, I will look in the legal library.
Your interests are evident. You spend time on forum to quieten our voices. Pathetic indeed. It is only a question of time when ERC will be outlawed.

malchish

You will not know about any court cases where a consumer won, because of one single reason - EVERY SUNGLE TIME LENDER SETTLED in favour of the consumer, to avoid the case going to court. Because a sungle victory wull mean end of ERC.
If you challenge the lender, they will settle. You have to have a lawyer.

dunstonh

You will not know about any court cases where a consumer won, because of one single reason - EVERY SUNGLE TIME LENDER SETTLED in favour of the consumer, to avoid the case going to court. Because a sungle victory wull mean end of ERC.

Evidence?

What "beneficial rate" do you talk about, when Bank of England rate is 0.5 %, but fixed mortgages were given at as high as 5.99%! This is not a bargain, but unfair profeteering!

That just shows that you dont know what you are talking about.

I have well read Ombudsman advice, and this website makes very clear that any ERC that DOES NOT REASONABLY EXTIMATES LOSS WILL BE DEEMED UNFAIR. No, a consumer who applies to Ombudsman will PROBABLY WIN

The FOS have only upheld cases where the ERC was not disclosed on the offer letter. Those were typically very many years back. Its not an error a lender is likely to be make again.

It is only a question of time when ERC will be outlawed.

Kiss goodbye to fixed rates, discounts, cashback mortgages then. Strange you say that they will be outlawed when there is not one jot of evidence to back you up. Next you will be saying that phone contract tie ins and satellite tv tie ins are unlawful as well.

malchish

Oh, you are an independent financial adviser!:rotfl:=paid and fed by mortgage lenders! ha, no problem then, your words equal to mortgage lenders' words. Not objective, but what all lenders want us to believe. No serious consumer will take your words seriously.
It is up to you to provide evidence that there has been any victory at all by mortgage lenders about ERC. I do not owe you any evidence.
The fact is, the precedent is yet to be, so far people who complained and filled court forms got their compensation. If you disagree, you provide evidence.