Redemption Fees, oh really?

tesla2017

Appreciating that there is a cost to the lender in extending credit given the large sums involved there is equally a point in which the mortgage has beared significant interest charges and profit for the lender given economies of scale. Is it therefore accepted that early redemption charges for mortgages are unlawful after a set period? Case law?

unforeseen

No. None.



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kingstreet

tesla2017 wrote: »

Appreciating that there is a cost to the lender in extending credit given the large sums involved there is equally a point in which the mortgage has beared significant interest charges and profit for the lender given economies of scale. Is it therefore accepted that early redemption charges for mortgages are unlawful after a set period? Case law?

Rate swaps, which tend to fund mortgage products have fixed dates and fixed charges.

The lender still has to pay the market counterparty even if the redemption takes place just the day before the swap ends.

Many products have tapering early redemption penalties, so on a five year fix they may fall by 1% per annum, 5%, 4%, 3%, 2%, 1% so they do in fact reflect the passing of time with an annual reduction.