ERC enforceable ? Woolwich 2 year fixed term with £% ERC reasonable?

[Amethyst]

posted on behalf of new user


hello.
asking a question on behalf of my son and his wife.
they have a shared ownership mortgage with the mortgage side of it being with the woolwich for approx 60,000 over a 35 year term. they had a 2 year fixed which exspires in december 2014.
i have suggested to them that they try to get another mortgage with other lender before the anticipated interest increase next year ( 2014 ). they currently paying 3.89 % but some lenders doing same type of mortgages for as little as 1.5 %
my daughter in law made inquirys with the woolwich and was told they would have to pay 3 % of their outstanding balance = 1,800 pounds !!
i will be telling them to look at their contract to see what is stated in there but even if there is something to that effect is it enforceable ??
i have been reading on the net about "mortgage exit admin fees" and the fsa in 2007 laying down guidelines and now the fca but there are no specific figures by these bodies only general terms and if consumer considers unfair complain to lenders or go to the financial ombusman.
surely there must be some specific figures somewhere saying what the maximum is a lender can charge a consumer to exit the type of mortgage my son/daughter in law has ?
is the 3 % the woolwich quotes legally enforceable by them ??

your feedback will be greatly appreciated.

thank you.

les

[PlanB]

Re: ERC enforceable ? Woolwich 2 year fixed term with £% ERC reasonable?

I'm afraid an ERC is enforceable since it's a term of the mortgage contract. This Early Redemption Charge is in effect a penalty for leaving the lender early as its title suggests and is always expressed as a % of the outstanding sum of the loan. This ERC is usually applied to loans where there is a low rate fixed period (to attract the borrower's initial business) followed by a move to the lender's Standard Variable Rate which can be a lot higher. The lender sees the fixed rate period as a lost leader. They will have borrowed the money on the SWAP market at a higher interest rate than they are charging the borrower during that time, and they then hope to recover the loss by charging the borrower more than it costs them for the rest of the loan. An ERC is non negotiable.

The Mortgage Exit Fee is a completely different administration charge usually around £150. This covers the release of the deeds and removal of the charge from Land Registry etc. Some (most) lenders will also charge a Redemption Statement fee when they issue the final bill. The mortgage exit fee cannot be greater than the one stated in the original mortgage Terms and Conditions.

There's been a lot of reclaims for overcharged Mortgage Exit Fees thanks to intervention by the FSA:

http://www.thisismoney.co.uk/money/m...-you-owed.html