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

dunstonh

the_money_pit wrote: »

We are tied into a repayment mortgage of 6.25% for 5 years. The 5 year period is up November 2012. I understand that we went into the deal voluntarily, but totally on the advice of the bank Mortgage Advisor. My question is, why can the bank not be held accountable for advice which was incorrect, ie "the mortgage rates are going to rise sharply". We would NEVER have tied ourselves into this deal without their inaccurate prediction and scaremongering.

A fixed rate deal is bought to give you payment certainty. You cannot make complaints that the adviser didnt have a crystal ball. (you can actually complain that he didnt have a crystal ball but its one of the easiest complaint rejections they would ever have).

As it happens, in 2007, rates were expected to rise. Events that followed overtook that.

the_money_pit

dunstonh wrote: »

A fixed rate deal is bought to give you payment certainty. You cannot make complaints that the adviser didnt have a crystal ball. (you can actually complain that he didnt have a crystal ball but its one of the easiest complaint rejections they would ever have).

As it happens, in 2007, rates were expected to rise. Events that followed overtook that.

Thank you for your reply, but surely the fact that the bank gave incorrect advice, advice which has cost us a huge amount of money, must be called into question. If in my job, not banking, I gave a client incorrect advice which resulted in their suffering, I would be held accountable. I cant understand the difference.

MarkyMarkD

But by buying a fixed rate, you haven't lost anything, in that you are still paying exactly the fixed rate you agreed to pay.

All you've lost is the opportunity to benefit from the totally unexpected plummeting of variable rates, which would have been very nice for you if you had chosen a variable rate (especially if it was a tracker rate).

If your lender was operating anything like best practice, they would have issued you with a "reason why" document explaining something like "You said that you were concerned that rates might rise, leading to an increase in your mortgage repayments, so I recommended a fixed rate which would ensure that your payments would remain at a known level which you can afford". You would then have been asked to sign this to show what you had agreed to.

Can you honestly say that this is NOT why you bought a fixed rate? It's why most people bought them in 2007-08. They were buying a mortgage which stretched their affordability and really couldn't afford to pay 1% or 2% more on their rate. So fixing was - even with hindsight - the prudent decision to make.

Even if the bank advisor said "the financial markets are currently expecting rates to increase", that would have been totally correct as dunstonh has said. Markets get things wrong, as much as individiuals.

If you, in your job, are sufficiently careless to give advice without stating the basis on which you are giving it, you would also deserve to be held accountable.

So, if you have an unequivocal statement in writing from the bank adviser "rates are going to rise, so you should fix your rate", your complaint would succeed. Without that, it won't.

dunstonh

but surely the fact that the bank gave incorrect advice, advice which has cost us a huge amount of money, must be called into question

They didnt give incorrect advice. You seem to want them to have a crystal ball. That isnt advice. You get that if you visit a fairground.

If in my job, not banking, I gave a client incorrect advice which resulted in their suffering, I would be held accountable.

In your job do you have a crystal ball?

Urbanlady

Hi can anyone help with a question on ERCs? We are having to move house due to my husbands employment before the end of the fixed period in 2014, thus will incur an ERC of £6k. As we wished to avoid this I contacted our lender (Santander) to ask if we could port the mortgage and they confirmed this was fine. As the houses we were looking at were more expensive I asked how much in total we could borrow. The adviser I spoke to asked some basic income details and credit commitments and based on this said we could borrow £348k subject to credit check. We found a house we liked which would need a mortgage of £244k, ie £104k less than we had been indicated would be available. All hunky dory at this point, so I told Santander that we were going to make an offer on the property which we did and legal work was started. An appointment was booked to finalise our application and after giving significantly more detailed info (which I understand is necessary) we were told we could only borrow £225k! As this is not enough to buy the new house we have had to find a new lender. When I protested to Santander I was told that they use different calculators between the two stages, ie between first contact and application. I was told this is to ensure too many people are not declined in the first instance! I was never told not to make an offer until the formal application had been made.

Do we have any grounds at all for appealing against the ERC? I understand that its our decision to move providers but I believe we were given such seriously misleading information in the first instance. Had we been told there was a chance we would be offered so significantly less on application we would never have made an offer on a house of that value. I can understand a bit of tweaking to get to the available lending number but not to such an extent! Frightening.

Any comments would be appreciated.

_Andy_

Urbanlady wrote: »

Hi can anyone help with a question on ERCs? We are having to move house due to my husbands employment before the end of the fixed period in 2014, thus will incur an ERC of £6k. As we wished to avoid this I contacted our lender (Santander) to ask if we could port the mortgage and they confirmed this was fine. As the houses we were looking at were more expensive I asked how much in total we could borrow. The adviser I spoke to asked some basic income details and credit commitments and based on this said we could borrow £348k subject to credit check. We found a house we liked which would need a mortgage of £244k, ie £104k less than we had been indicated would be available. All hunky dory at this point, so I told Santander that we were going to make an offer on the property which we did and legal work was started. An appointment was booked to finalise our application and after giving significantly more detailed info (which I understand is necessary) we were told we could only borrow £225k! As this is not enough to buy the new house we have had to find a new lender. When I protested to Santander I was told that they use different calculators between the two stages, ie between first contact and application. I was told this is to ensure too many people are not declined in the first instance! I was never told not to make an offer until the formal application had been made.

Do we have any grounds at all for appealing against the ERC? I understand that its our decision to move providers but I believe we were given such seriously misleading information in the first instance. Had we been told there was a chance we would be offered so significantly less on application we would never have made an offer on a house of that value. I can understand a bit of tweaking to get to the available lending number but not to such an extent! Frightening.

Any comments would be appreciated.

But surely even if you'd had been declined at stage one it wouldn't have changed anything..
Fact is if you want to move there will be ERCs, nothing you can do about that I'm afraid

dunstonh

Do we have any grounds at all for appealing against the ERC?

No. They are considered fair and legal and exist because the lender incurs costs if you withdraw early.

I understand that its our decision to move providers but I believe we were given such seriously misleading information in the first instance.

Lending criteria changes frequently. A quick and dirty indication of the sort of range is not the same as an agreement in principle. Did you get an agreement in principle or just a guide?

Urbanlady

_Andy_ wrote: »

But surely even if you'd had been declined at stage one it wouldn't have changed anything..
Fact is if you want to move there will be ERCs, nothing you can do about that I'm afraid

It would have changed things as we wouldn't have put an offer on a house the value we did if we had been declined at stage 1, we'd have found one for less within the limits offered. However I note your answer on whether we can appeal and thank you for taking the time to answer.

Thank you also Dunstonh, I dont think it was an agreement in principle but will check, would this make a difference at all?

dunstonh

Thank you also Dunstonh, I dont think it was an agreement in principle but will check, would this make a difference at all?

Yes. Often there are three stages to the process

1 - you havent found anywhere yet but want a guide to the sort of range that you could be looking at.
2 - you are getting more serious with the search and have identified a property or several properties and went to check the borrowing is ok and get the agreement in principle (some estate agents ask to see it at when you put the offer in)
3 - you agree price and complete the application process.

Some will bypass the first stage but it really depends on where you are you with your househunting. Even an agreement in principle isnt guaranteed but it is unusual to back down on that if no new information has come to light. However, if you never got an agreement in principle then effectively you never got any official indication of what they would lend. You probably never got further than the quick and dirty indication of range.

alafin

Hello

Apologies if this has been covered elsewhere. If it has please redirect me.

I have a mortgage with Bank of Scotland which I took out on a 5 year deal in 2009. I went into the branch today to double check the ERC on this product. I have the facility to borrow up to £80k on the product but I only ever drew down about £60k. Branch tell me I would have to pay 3% of the £80k as opposed to 3% of what I have outstanding.

Does this sound right? My mortgage offer document has a section covering the ERCs applicable at various stages. States that on or before 30/04/2014 my ERC would be "3% of the amount repaid", which I took to mean 3% of whatever was outstanding should I opt to repay the mortgage in that timeframe. It also has a cash example column in the table of ERCs for this which is £2414.85, but again the word "example" to me suggested that it was just that, an example not an explicit this-is-what-you-will-pay-regardless figure.

Thanks in advance for any response.