5% Early Redemption Fee with 1 Year Left - Help Please

Roy_Herts

ViolaLass wrote: »

Maybe they thought it was less attractive to borrowers than they had hoped. Doesn't mean it was unfair.

Well the guidance from the financial ombudsman states:
The lender's actual loss if a mortgage is repaid early is also a consideration. An early repayment charge may be unfair if it is more than the actual loss to the lender (except if it was a genuine "pre-estimate" of loss when the agreement was entered into).

If an early repayment charge is unfair, the consumer is not bound by it - even if they knew about it. The relevant rules do not allow a "reasonable" charge to be substituted.

Therefore I would say it is unfair, and they knew it.

ViolaLass

Roy_Herts wrote: »

Well the guidance from the financial ombudsman states:
The lender's actual loss if a mortgage is repaid early is also a consideration. An early repayment charge may be unfair if it is more than the actual loss to the lender (except if it was a genuine "pre-estimate" of loss when the agreement was entered into).

If an early repayment charge is unfair, the consumer is not bound by it - even if they knew about it. The relevant rules do not allow a "reasonable" charge to be substituted.

Therefore I would say it is unfair, and they knew it.

You don't have any evidence that it doesn't reflect that actual loss to them (it may be that they managed to borrow money on more favourable terms later on which wouldn't affect your deal).

dimbo61

Can you not wait the 11 months ?
Can you make overpayments each month ?
Read the terms and conditions very careful does it say you will pay 5% of the outstanding balance in erc,s !
If they allow 10% overpayments in one year can you get hold of £14,400 now and overpay that. You might then have an ERC of 5% of £130,000

Thrugelmir

Roy_Herts wrote: »

Therefore I would say it is unfair, and they knew it.

What facts do have to support this assertion?

Roy_Herts

ViolaLass wrote: »

You don't have any evidence that it doesn't reflect that actual loss to them (it may be that they managed to borrow money on more favourable terms later on which wouldn't affect your deal).

But surely I do. The evidence is in the calculation. They have had just over 4 years of my payments and interest as opposed to me getting out after 6 months and incurring almost the same penalty. These lenders are not stupid they impose the penalty to cover their losses in the worst case scenario. I am surely not that as they the loses they will incur against who they borrowed the money from only covers 10-11 months out of 60.

Also if they have now decided on a blanket sliding scale on fixed rate mortgages from last year then they have accepted the point above and borrow in line with this risk.

Roy_Herts

Thrugelmir wrote: »

What facts do have to support this assertion?

Their current position.

ViolaLass

You don't need to persuade us, you need to persuade Nationwide.

Thrugelmir

Roy_Herts wrote: »

Their current position.

That's totally irrelevant.

Roy_Herts

ViolaLass wrote: »

You don't need to persuade us, you need to persuade Nationwide.

Yes, I am aware of that, just wondering if it worth perusing and if anyone knew of successful examples. What is the best way to go about it do you think, a letter or a call. Calling them seems to be a bit of pot luck in respect of who you get to talk to.

Do you know if overpayment reserves can be used to pay ERC's?

Many thanks

magpiecottage

Roy_Herts wrote: »

These lenders are not stupid they impose the penalty to cover their losses in the worst case scenario. I am surely not that as they the loses they will incur against who they borrowed the money from only covers 10-11 months out of 60.

Also if they have now decided on a blanket sliding scale on fixed rate mortgages from last year then they have accepted the point above and borrow in line with this risk.

As you say, though,

Roy_Herts wrote: »

the guidance from the financial ombudsman states:
An early repayment charge may be unfair if it is more than the actual loss to the lender (except if it was a genuine "pre-estimate" of loss when the agreement was entered into).

So they estimated the potential loss because they had to address a conflict of interest between you and their other members.

You can complain but, provided the potential penalty was explained to you in terms that were clear, fair and not misleading, I do not think you have a case.

On the other hand, you could ask to pay the balance of the interest due in the fixed rate period in order to get out if that was less than the penalty.