Mortgage redemption is a punitive. Any advice?

conman666

dunstonh said:

conman666 said:

@dunstonh Would a million pounds be fair and reasonable? What is the limit?

Yes, it would be fair if the contract terms were relative to the amount being borrowed.   You would have to have a large mortgage to get that amount, but it would still be fair.  There is no limit.

People have tried to get out of ERCs, and they continue to be found reasonable as they reflect the lender's costs.    Deals are financed by investors.  This can be fixed term deposits or the money markets with swaps etc.    The lender has to pay penalties if they cancel those earlier.    Hence why the ERC exists.

I might be missing something but I'm offering to pay the whole interest. All the way up to the end of the fixed period. Plus admin costs. The ombudsman says the ERC must be a reasonable estimate of the cost of early repayment. So I'm offering EVERY PENNY they would get (unless I'm being stupid and they would get money from someone else)?

dunstonh

Is it a fee? Or is it a punitive fine?

Clearly is not a fine.  It is a fee.

I'm saying I would pay THE WHOLE INTEREST all the way up to the end of the fixed period. Plus admin costs. But they want more.

It doesn't work that way.   They would have to repay the investors, which triggers a lump sum charge.

The ombudsman says the ERC must be a reasonable estimate of the cost of early repayment.

And you will find they reject every complaint where people try to get out of it.

So I'm offering EVERY PENNY they would get (unless I'm being stupid and they would get money from someone else)?

But you are not offering to pay the charge the lender suffers by you repaying early.

TheAble

How come the lender can't just sit on the money though? Or is it forced to repay the investors early in turn?

london21

You can delay the sale but the banks are really in the business of making money.

dunstonh

TheAble said:

How come the lender can't just sit on the money though? Or is it forced to repay the investors early in turn?

There are rules on holding client money that are different to operating accounts.   And almost certainly, they don't want the faff and hassle with dealing with rare cases like this.

Edi81

There aren’t investors as such. They borrow and hedge (fix their interest) in large tranches not for each small loan. 

As others have said your complaint will go nowhere with the regulators - it’s been tried before and fails every time. 

Seraphi

conman666 said:

Is it a fee? Or is it a punitive fine? I'm saying I would pay THE WHOLE INTEREST all the way up to the end of the fixed period. Plus admin costs. But they want more. Am I missing something here? I'm obviously not an expert on finances. We never in a million years thought we would ever leave the UK so that's why the specific ERC didn't seem relevant at the time.

But it was relevant, because it was in your agreement. A bank sets out the clauses and obligations with lawyers and a fine toothcomb in a mortgage agreement for good reason.

You signed the document outlining the rules that the mortgage lender are insisting you honour the contract. You might not like it, but that is very different to it not being fair, lawful or reasonable.

It is fair - the rules were known, and provided in writing when you took out the mortgage. They haven't changed.

It is lawful - plenty have challenged the idea of ERCs with the FCS and lost. Failure at the FCS hurdle would make a high or supreme court case very difficult. Never say never but I doubt you have that sort of money to burn to take it that far...

It is reasonable - due to the reasons set out by others on this forum regarding the costs of a mortgage ending early.

fewcloudy

conman666 said:

I might be missing something but I'm offering to pay the whole interest. All the way up to the end of the fixed period. Plus admin costs. The ombudsman says the ERC must be a reasonable estimate of the cost of early repayment. So I'm offering EVERY PENNY they would get (unless I'm being stupid and they would get money from someone else)?

You are missing something I'm afraid, and others have made it clear what that is.
You can't ignore the mortgage contract you signed in favour of a different arrangement that suits you better financially.
But do come back and update us with how you get on.