ERC's or Redemption Penalties

[Gayda]

I have today written to David Cameron a long letter regarding ERC's and Redemption penalties pleading for these to become illegal and that these rip off charges be repaid and backdated to consumers. I have outlined my circumstances and hope that I will be heard.

It is my thought that these ERC's and Redemption Penalties are no different than that of Bank Charges and should be outlawed.

I wonder if we all wrote to whomever in the government and pestered them to act then maybe our voice would be listened to especially nearing elections. Do they want our vote or not.

So my friends out there in similar circs lets all hassle them and keep writing and complaining out this as much as possible until they wake up and smell the coffee.

I hope you all agree with me.

Regards
Gayda

[Kafka]

Re: ERC's or Redemption Penalties

Gayda

I don't understand why you are saying that they are the same as bank charges, because there are all sorts of tie-in agreements that have such clauses as ERC for breaking contract.

Please can you advise what your reasoning is to make this argument?

[stevokenevo]

Re: ERC's or Redemption Penalties

I dont agree either.

customers are invariably given reductions in interest rates in exchange for tie in periods.

You cant have a discounted rate without a penalty clause.

In these circumstances the lenders are covering their interests.

No one is forced to take out a mortgage with a tie in period.

[Gayda]

Re: ERC's or Redemption Penalties

Hi, well, I said it is my opinion. Why should they be treated any differently to bank charges after all we can all change bank accts and card accts to get better deals why should these ERC's or Redemption penalties be charged at excessively high rates such as the one I am with which is 7% this year and 6% next at a cost to me in the region of nearly £10k. How can they justify such an amount just for redeeming your mortgage early are they to make us believe it would cost them this amount to close a mortgage. I dont think so. I am in a very difficult place at the mo and need to get out of this situation because I am heading down the repossession route. Nasty.

[Gayda]

Re: ERC's or Redemption Penalties

I agree, no one is forced to but circumstances beyond my control have put me in this situation. It would not have been a choice I would have made.

[stevokenevo]

Re: ERC's or Redemption Penalties

Hi, well, I said it is my opinion. Why should they be treated any differently to bank charges after all we can all change bank accts and card accts to get better deals why should these ERC's or Redemption penalties be charged at excessively high rates such as the one I am with which is 7% this year and 6% next at a cost to me in the region of nearly £10k. How can they justify such an amount just for redeeming your mortgage early are they to make us believe it would cost them this amount to close a mortgage. I dont think so. I am in a very difficult place at the mo and need to get out of this situation because I am heading down the repossession route. Nasty.

I agree, no one is forced to but circumstances beyond my control have put me in this situation. It would not have been a choice I would have made.

I am sorry to hear you are having problems at the moment.

I dont think there is any easy way to say this, but, just because there is an expensive charge to redeem your mortgage early, does not make it unlawful.

I understand you may be caught between a rock and a hard place, but i think you really need to look at this from a different perspective.

perhaps posting up some details of your current financial situation in the debt forum (http://www.legalbeagles.info/forums/...splay.php?f=64), will allow the helpful people on here to analyise and advise on a way to deal with your problem.

once you ease the pressure on yourself a bit, then we can set you straight about the differences between unlawful bank charges and ERC's.

Good luck and keep the faith :okay:

[Amethyst]

Re: ERC's or Redemption Penalties

Hi Gayda - nice to see you back about - please update us with how things are going in the debt forum and we'll try our damndest to help you out.
Ame
xx

[argentarius]

Re: ERC's or Redemption Penalties

Hi Gayda

I'm sorry to hear about your circumstances.

It's an unfortunate fact that most people who end up incurring ERCs don't expect to ever pay them when they take out the mortgage involved. But, as a few others have already said, most lenders (and I admit, not all) offer a choice between mortgages with ERCs and those without.

Most people choose a mortgage with an ERC because they want to pay a lower rate; it's a trade-off and therefore not a rip-off. You are getting a (often substantial) benefit, by accepting the risk of paying an ERC.

Unfortunately, at the sub-prime end of the market, there tends to be little choice and people can only choose between a few lenders, all of whom charge very high ERCs and who don't offer products without them. Once again, though, it could be argued that these lenders are taking on a higher level of risk by advancing money to sub-prime customers, and that they are entitled to a higher rate of return for doing so, part of which is the levying of higher ERCs.

Indeed, sub-prime lenders are often far more prone than others to customers repaying early - precisely because they are charging high rates, and because many customers would be able to remortgage to prime lenders after sorting out their credit issues.


None of this discussion helps your situation, but I'm afraid that most people who have posted thus far seem to share my view that you are required to pay the ERCs.

One avenue to consider would be if you bought the mortgage through an adviser. If so, the adviser should have made you aware of the ERCs, and should have offered you a choice of mortgages without ERCs (unless you fall into a category where these realistically would not have been available). In the absence of such a discussion, you could seek to recover the ERCs from the adviser on the basis of their inadequate advice.

Your solicitor should also have discussed the ERCs with you as a significant term in the mortgage contract he was helping you to sign up to and that's another potential avenue (although, probably, even less of a hard one to prove).

I think it would be an uphill battle, but it could be worthwhile in your financial circumstances. Hope that helps.

[scoobydoo]

Re: ERC's or Redemption Penalties

I think you are right in that the ERC ususally are only there for the period of the reduced interest rate and are intended to tie you in.Most people are aware of them and think - well I am unlikely to move for say 5 years so the charge is not relevant. But as you say most people do not think of what would happen in the case of possession. In some cases the ERC is not repayable if you carry over a mortgage to another property - for example if you are moving down market - but that is rare.

[argentarius]

Re: ERC's or Redemption Penalties

I don't entirely agree, scoobydoo. Most mortgages nowadays are in fact portable, meaning that the ERC is not incurred if the mortgage is "ported" to a new property. And if the mortgage is down-sized, a pro-rata ERC is normally incurred (on the reduction in mortgage size) rather than a full ERC.

As well as the repossession circumstance you refer to, the most frequent cause of ERCs being incurred is almost definitely relationship breakdown. Most people don't buy a house with their partner on the assumption that they might break up one or two years down the line, and hence disregard the ERCs. "Love is blind" and all that.

[Kafka]

Re: ERC's or Redemption Penalties

I don't entirely agree, scoobydoo. Most mortgages nowadays are in fact portable, meaning that the ERC is not incurred if the mortgage is "ported" to a new property. And if the mortgage is down-sized, a pro-rata ERC is normally incurred (on the reduction in mortgage size) rather than a full ERC.

This is exactly right - I ported a mortgage when I moved 4 years ago to a bigger property and would have forfeited the pro rata ERC had I downsized.