Early repayment penalty

andymckibbin

My wife and I took out a buy-to-let mortgage with an initial five-year fixed interest rate period two years ago. We now want to sell the property, but the early repayment is fixed at 5% of the loan amount (does not taper during the five-year period). I note that the FCA says that the repayment charge should be "a reasonable pre-estimate of the costs as a result of the customer repaying the amount due under the regulated mortgage contract before the contract has terminated" [https://www.handbook.fca.org.uk/handbook/MCOB/12/3.html]. A flat amount seems hard to defend in the light of this.
Does anyone know of a borrower successfully challenging such a charge under these circumstances?
Thanks

Thrugelmir

BTL mortgages are unregulated and not covered by the FCA. 

davidmcn

Also bear in mind that such penalties generally reflect the wholesale terms under which the lender has borrowed the money, and if those have no taper then your ERC does reflect their actual costs.

foxy-stoat

You signed up to the terms so you will have to pay it when you sell.

csgohan4

I assume you found terms originally reasonable before you took it out

foxy-stoat

csgohan4 said:

I assume you found terms originally reasonable before you took it out

Likely they didnt read them

fewcloudy

csgohan4 said:

I assume you found terms originally reasonable before you took it out

How does that statement help the OP or answer the question?

Plus, there's a heck of a lot of people out there who have successfully challenged the original terms of a great number of financial products, the industry's track record is poor, it's a reasonable question for the lay person to ask.

Thrugelmir

fewcloudy said:

csgohan4 said:

I assume you found terms originally reasonable before you took it out

How does that statement help the OP or answer the question?

Plus, there's a heck of a lot of people out there who have successfully challenged the original terms of a great number of financial products, the industry's track record is poor, it's a reasonable question for the lay person to ask.

Unregulated (commercial lending) comes under the category of people should understand what they are entering into. As there's no consumer protection. 

fewcloudy

Thrugelmir said:

fewcloudy said:

csgohan4 said:

I assume you found terms originally reasonable before you took it out

How does that statement help the OP or answer the question?

Plus, there's a heck of a lot of people out there who have successfully challenged the original terms of a great number of financial products, the industry's track record is poor, it's a reasonable question for the lay person to ask.

Unregulated (commercial lending) comes under the category of people should understand what they are entering into. As there's no consumer protection. 

People should understand what they are entering into, regardless of whether or not there is consumer protection.

However.  If my mortgage broker had ever responded to some of my questions in the snide manner that some of these clowns have further up thread, he would have received not one penny of my business. At best.

It’s not difficult to respond politely to questions online, most people seem to manage it.

andymckibbin

foxy-stoat said:

csgohan4 said:

I assume you found terms originally reasonable before you took it out

Likely they didnt read them

I did, but judged the risk that I'd be wanting to exit early to be low.
Thrugelmir said:

BTL mortgages are unregulated and not covered by the FCA. 

Ah, interesting - I didn't know that.
Thanks for the information - all useful.
I found this part of their general terms and conditions of lending interesting:

An Early Redemption shall be subject to the following conditions:
...
the Borrower agrees that the amount payable in respect of the early repayment charge is a genuine pre-estimate of the loss the Lender will suffer as a consequence of the Early Redemption of the Loan;

The phrasing of this seems to be specifically designed to forestall a challenge as outlined above.