Redemption Penalty rip off

JohnInDebt

lynnexxxo wrote: »

Ok, yeah by paying back the money the bank has zero risk but they will still have lost out on money. The OP has been on a 5 year fixed deal which has a lower rate than the SVR.

The name 5 YEAR FIXED DEAL says it all really. its not a 4yr 10 month fixed deal.

How will the bank lose out? He wants to pay the final 2 payments early, they will still get all the payments as arranged.

lynnexxxo

The bank will lose out because
If the OP had wanted a deal with no tie ins them he would not have got as good a rate (higher rate = more money for bank)

The bank will be unable to charge interest (which makes up the most part of a mortgage payment) if the capital has been repaid early.

macaque_2

lynnexxxo wrote: »

Ok, yeah by paying back the money the bank has zero risk but they will still have lost out on money. The OP has been on a 5 year fixed deal which has a lower rate than the SVR.

The name 5 YEAR FIXED DEAL says it all really. its not a 4yr 10 month fixed deal.

It is like talking to a plank of wood. I shall bow out of this debate.

JohnInDebt

lynnexxxo wrote: »

The bank will lose out because
If the OP had wanted a deal with no tie ins them he would not have got as good a rate (higher rate = more money for bank)

The bank will be unable to charge interest (which makes up the most part of a mortgage payment) if the capital has been repaid early.

He's happy to make the final 2 payments early including all the interest.

Curv

lynnexxxo wrote: »

The name 5 YEAR FIXED DEAL says it all really. its not a 4yr 10 month fixed deal.

However, most deals don't run for 2/3/5 years from the start of the mortgage, they run until a specific expiry date - in this case the end of February 2008.

It's quite possible that the OP hasn't actually had a full 5 years worth of 'deal' out of the bank and, whilst that would be down to him because he agreed the completion date in the same way as he's agreeing the sale date, it might be worth him pointing out to the bank that he's had less than 5 years benefit, if he has. It won't make any difference to the T&Cs, but it might help soften their attitude.

Apologies for the last-but-one sentence; possibly the most poorly constructed sentence I've read all morning.

lynnexxxo

macaque wrote: »

It is like talking to a plank of wood. I shall bow out of this debate.

Yeah thanks for that.

Must put that in my notebook of ' highly intelligent comments to make'. :rotfl:

merlinthehappypig

I think recent posts have lost sight of what the original post was about. The OP wanted two things:

Advice on how to resolve the situation he finds himself in; and
Whether or not he might have a case for the financial ombudsman.

These have been answered. He has been given plenty of helpful advice on what to do, most of which involve some inconvenience, but go a long way to mitigating the penalty charge. He clearly doesn't have any sort of case for the financial ombudsman. Debate about the banks' charges and the morality of their profits is an entirely different subject and no amount of discussion will further the OP's cause.

Yes the penalty does seem excessive and, yes, I can see his point of view about the short time remaining. I would probably feel the same way in the same situation, but would have ensured that the situation didn't arise.

The OP is clearly intelligent enough to realise that he would benefit from a 5 year fixed rate deal and will have benefited handsomely from making that decision, so we shouldn't be under any illusions that he has somehow been 'ripped off' by the bank and is a victim of big business greed because he, and he alone, has taken the decision to end the mortgage early.

The situation is still within his power to resolve and I don't think any amount of argument about the rights and wrongs of the charge will help.

pandhandj

as a (potentially) interesting aside:

last year when my then current fixed term mortgage was coming to an end, i was able to pay a few grand towards it. I phoned my BS to see how to go about it. The end date of the term was 22nd of October (i was staying with them for my new fixed term).

I asked if i could send them a cheque, they said that they would cash the cheque when they recieved it, if this was on or before the 22nd, then i would have to pay the ERC. If it was recived on or after the 23rd, then i would already be on thier SVR and that months mortgage payment would be calculated on that IR. I politely stated that what they were saying was - if i wanted to pay some extra to the mortgage, then i would face the ERC or pay it after the fixed term had ended (no ERC to pay) and we will make you pay the SVR for a month before allowing the new fixed rate to start.

They said yeah - tough!

a win win situation for them. I paid the SVR for a month, as the ERC took to big a chunk out of the money i could pay off early.

NB - overpayments were not allowed on the fixed rate deals.

nollag2006

I was in a similar position to the OP a few years back with Mortgage Express (part of Bradford & Bingley at that time).

I redeemed the mortgage two weeks shy of the discount rate ending, and was hit with a £2k ERC. Raised the issue of Unfair Contract Terms with both the bank, and ultimately the Financial Ombudsman, but got nowhere.

In your situation, you need to consider is it worth the hassle of pursuing this through the Ombudsman, or could you try to either defer the completion date in return for a slightly reduced asking price, or simply find another purchaser if your current one is unwilling to budge?