ERC and Treating customer fairly

hollies69

Our 5 year fix comes to an end next June and on 1st Dec we can get a new rate.  Seeing everything hitting the fan in Sep we decided to pay the ERC (which is huge) and secure a lower rate.  Due to a bank error the offer came in last week.  In the meantime my husband was told he has to have fairly major surgery so reluctant to use the money earmarked for ERC just in case - he is self employed and won't get paid while recuperating and income protection kicks in after 3 months.  So we have a mortgage offer but bank will not extend it until 1st December and say we need to pay ERC to secure this rate and start paying higher monhtly amount immediately even though on 1st Dec we could switch with no penalty and start paying higher rate next year.  I know legally they are doing what they can but is this treating customer fairly?  Does anyone have experience of persuading a bank under this  FCA rule?FCA says banks should also n"Consider what more they can do to encourage mortgage borrowers to think about switching to a less costly option where it is available."  

dunstonh

 So we have a mortgage offer but bank will not extend it until 1st December and say we need to pay ERC to secure this rate and start paying higher monhtly amount immediately even though on 1st Dec we could switch with no penalty and start paying higher rate next year. 

Deals are financed by investors.  There are specific hard dates put on the deals where the money needs to be advanced by otherwise, you lose the deal as the lender can no longer obtain the finance for that deal beyond that point.

 I know legally they are doing what they can but is this treating customer fairly?  

Whilst it is unfortunate for you, it is not treating you unfairly.

 Does anyone have experience of persuading a bank under this  FCA rule?

It is not a rule.  It is a principle.  

FCA says banks should also n"Consider what more they can do to encourage mortgage borrowers to think about switching to a less costly option where it is available."  

Which has nothing to do with your scenario, as they are not preventing that.   Indeed, they have agreed to it, but it is you that is holding back.      Nothing is stopping you let that deal go and select from another one that is available within your preferred date range.

K_S

hollies69 said:

Our 5 year fix comes to an end next June and on 1st Dec we can get a new rate.  Seeing everything hitting the fan in Sep we decided to pay the ERC (which is huge) and secure a lower rate.  Due to a bank error the offer came in last week.  In the meantime my husband was told he has to have fairly major surgery so reluctant to use the money earmarked for ERC just in case - he is self employed and won't get paid while recuperating and income protection kicks in after 3 months.  So we have a mortgage offer but bank will not extend it until 1st December and say we need to pay ERC to secure this rate and start paying higher monhtly amount immediately even though on 1st Dec we could switch with no penalty and start paying higher rate next year.  I know legally they are doing what they can but is this treating customer fairly?  Does anyone have experience of persuading a bank under this  FCA rule?FCA says banks should also n"Consider what more they can do to encourage mortgage borrowers to think about switching to a less costly option where it is available."  

@hollies69 I don't think you will have any luck unfortunately. I have had the odd case where the lender has waived an ERC for the client's mortgage to be paid off early but that was to do with bereavement (mortgage being paid off through life insurance, sale of property due to surviving spouse not being able to keep the mortgage, etc), terminal illness (again mortgage being paid off through insurance).

It may not be optimal but in this situation, you have the option to leave things as they are and remortgage (or switch products) once the ERC window ends.

There's no harm in complaining as it doesn't involve any cost and is quite low effort, but I highly doubt that you'd have a positive outcome or that it would be resolved before 01 Dec.

JMA74

Treating Customers Fairly also means not giving some customers preferential treatment over others.  ERC is a contractual term and very very rarely waived or amended.  Only really in cases of death. 

Lots and lots of people at the moment are choosing to pay ERC to switch early. Equally as many will probably decide to not pay it and wait to see what rates are available when it comes to their rate switch window.   

Unfortunately there is nothing unfair about what they are offering.  They make an offer, its up to you to decide if you want to accept its terms or not. You are free to decline as lots of others are doing.