Excessive early repayment penalty

Gina_Brad

Hello, I am having to repay my 5 year fixed rate mortgage 10 months early and although if I paid till full term I'd have another £9k to pay I stupidly didn't realise the penalty didn't taper and I'm looking at having to pay £15K which seems very unfair. I've asked Santander to review and have been told there is no way to reduce the payment other than overpaying 10% this year, which hardly makes a dent in the amount. Does anyone here have any advice or thoughts on how to challenge this?  Or am I wasting my time as I signed the agreement! Thanks 

[Deleted User]

The latter.

It's a cost that that the lender needs to cover for the early redemption.

[Deleted User]

Comes up all the time on here. No one has ever come back to say they managed to get it reduced.   Its a contractual term and if they bent it for someone out of nothing but Goodwill then theyd have to do it for others.   No real reason for them to do it unless you can show they have made a mistake

K_S

@gina_brad Unfortunately, something I see far too often with clients on Santander mortgages. I always warn prospective borrowers about it when there's a slightly more expensive lender with a much fairer ERC structure.

The only way you may potentially get somewhere challenging it is if you had taken an advised route (that would exclude non-advised product switches or execution-only remortgages, etc), had told the advisor that you might need to move within the next few years and yet weren't made aware of the risks/ramifications of having to do so. A good broker would almost certainly have covered that base and documented it when recommending a 5 year fix, can't comment on bank advisors.

Thrugelmir

Gina_Brad said:

I stupidly didn't realise the penalty didn't taper and I'm looking at having to pay £15K which seems very unfair. 

The terms of the product would have been very clearly set out at the outset. By signing the offer made you accepted them.  As a consequence there's no basis for complaint. 

kingstreet

The sum Santander has to pay to compensate the third party providing the rate swap funding your fixed rate doesn't recognise any other date than the one where the fix ends. A non-tapering ERC probably got you a better rate than one where there ERCs were tapered.

As K_S said, if you reported this possibility to the source of your original advice, you may have grounds for complaint. However, if all you wanted was the best five year fixed for your needs, you probably got exactly that...

Gina_Brad

Thanks for all the comments - I appreciate it