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Calculating compensation for incorrect Early Repayment Charge
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MattLondon2016
Posts: 3 Newbie
The bank has contacted me to say they incorrectly applied an early repayment charge on a mortgage I repaid early. (it was apparently for them to take it because I took out a mortgage with them for a different property 2 weeks later).
They have offered to repay the charge plus interest (8%).
The charge, approx £5,500, was made back in March 2016; we're now May 2024 and I don't have a problem with the amount they've calculated based on that 8% number.
To be honest it's a nice surprise and I don't want to be greedy ... but:
My question is, should they offer any additional compensation for inconvenience or anything else in addition to the purely financial calculation?
They have offered to repay the charge plus interest (8%).
The charge, approx £5,500, was made back in March 2016; we're now May 2024 and I don't have a problem with the amount they've calculated based on that 8% number.
To be honest it's a nice surprise and I don't want to be greedy ... but:
My question is, should they offer any additional compensation for inconvenience or anything else in addition to the purely financial calculation?
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Comments
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Typo above. It should have read "(it was apparently wrong of them to take it because I took out a mortgage with them for a different property 2 weeks later).0
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What have you lost? That is the basis of compensation - you must have lost something financially to be able to show more is needed.
Interest rates were 0.25% from August 2016, falling as low as 0.10% March 2020 to 0.75% to March 2022, you are getting 8% (simple) interest, vastly higher than you could have got through having the money and investing it. That 8% interest IS the inconvenience paymentSam Vimes' Boots Theory of Socioeconomic Unfairness:
People are rich because they spend less money. A poor man buys $10 boots that last a season or two before he's walking in wet shoes and has to buy another pair. A rich man buys $50 boots that are made better and give him 10 years of dry feet. The poor man has spent $100 over those 10 years and still has wet feet.
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8% interest rate is the penalty for them and compensation to you... even though it is 'simple interest' and not compounded.
£5500 x .08 x 8 years = £3520 = Total £9020.
£100 in 2016 is worth 137 today. So £5,500 would be worth £7537 which is less. Even compounding a 5% annual interest rate over 8 years is only £8126 and would you have been able to get that rate of interest over all those years?
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My question is, should they offer any additional compensation for inconvenience or anything else in addition to the purely financial calculation?The 8% interest is the requirement. No more no less.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.3
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