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

kingstreet

JethroUK wrote: »

Morally wrong (as you've found out)

Its prudent for lending company to charge early settlement fee to recover the administration costs of setting up a new account (£100 - £200 ?) - but they cant use this to write blank cheques to themselves and it will be another case for FSA if banks cant control themselves

It is beyond reason (any normal persons definition of 'reason') for them to

A/ Charge £3000 to fill out a couple forms - if you contest this in court you'll have a guaranteed win, for the reason above

B/ If they are going to attach early settlement fees they can not then go on to dictate restrictions on lending (stop you moving home)

Personally - when i moved my mortgage to First Direct from Alliance & Leics they did 'try' to charge me for early settlement after 10 years - they charged me £370 - I objected in writing to A & L (substance being I was not made aware of early settlement fee at time of the contract) - 2 weeks later got a cheque back

They would not get £3000 out of me, just for moving home early - thats a stone cold fact!!!

You're responding to a post from 2007.

In answer, the OP was probably charged an early repayment penalty for repaying something like a fixed rate within the early repayment penalty period.

This is not an administration fee. It is used to compensate the market counterparty which supplied the fixed rate funds at the outset and for the agreed period.

Borrowers are entitled to be charged final/discharge fees which correspond with what they were quoted at the point they took out their mortgage. Lenders aren't permitted to increase them in the intervening period of time. This has no relevance to early repayment penalties, though.

Finally, portability is completely at lender's discretion. It confers no right to a new mortgage or a guarantee that the lender will accept the applicant, or the property. With no ability to port, the borrower would have no option on moving but to take a new mortgage with a new lender and redeem the old mortgage, including any quoted discharge fees and early repayment penalties.

dunstonh

Morally wrong (as you've found out)

It is not morally wrong.

Its prudent for lending company to charge early settlement fee to recover the administration costs of setting up a new account (£100 - £200 ?) - but they cant use this to write blank cheques to themselves and it will be another case for FSA if banks cant control themselves

That isnt the charge being discussed on this thread.

A/ Charge £3000 to fill out a couple forms - if you contest this in court you'll have a guaranteed win, for the reason above

Rubbish.

Personally - when i moved my mortgage to First Direct from Alliance & Leics they did 'try' to charge me for early settlement after 10 years - they charged me £370 - I objected in writing to A & L (substance being I was not made aware of early settlement fee at time of the contract) - 2 weeks later got a cheque back

Not the same thing being talked about on this thread.

No lender could justify £3000 for filling out a couple forms to 'a judge'

Yes it can very easily. The costs incurred in repaying a deal arranged on special terms within the tie in period can be significant to a lender. The investors that fund the deal still need paying or will charge a lender for early repayment. Or the deal may be funded by depositors on a higher fixed rate which still has to be paid out.

You seem to be mixing your charges up (MEAF and ERC).

honsow

Hi all,
I bought our house with a mortgage from Bristol and West for 2 years, when it came to renewing I signed a new deal for 5 years due to the uncertainty of the economy. After a couple of years into my deal Bristol and West changed to Bank of Ireland. I now have 16 months left on my deal and wanted buy a bigger house due to a bigger family. I looked around at what mortgage I could get from the market and I would have no problem with my finances. I contacted Bank of Ireland to discuss if they would lend me more money, but they refused to to them not lending anymore so I asked how much it would cost to move lender and they said I would have to pay the early redemption charge plus admin fees. I thought this was unfair as I could get another mortgage no problem somewhere else and the only reason I wanted to move lenders was because Bank of Ireland weren't in the business for lending anymore. I have tried through the Financial Ombudsman but they have sided with the mortgage lender. Any advice would be great.

Thrugelmir

honsow wrote: »

Hi all,
I bought our house with a mortgage from Bristol and West for 2 years, when it came to renewing I signed a new deal for 5 years due to the uncertainty of the economy. After a couple of years into my deal Bristol and West changed to Bank of Ireland. I now have 16 months left on my deal and wanted buy a bigger house due to a bigger family. I looked around at what mortgage I could get from the market and I would have no problem with my finances. I contacted Bank of Ireland to discuss if they would lend me more money, but they refused to to them not lending anymore so I asked how much it would cost to move lender and they said I would have to pay the early redemption charge plus admin fees. I thought this was unfair as I could get another mortgage no problem somewhere else and the only reason I wanted to move lenders was because Bank of Ireland weren't in the business for lending anymore. I have tried through the Financial Ombudsman but they have sided with the mortgage lender. Any advice would be great.

Have they not offered you a get out option?