What’s an early repayment charge?
An early repayment charge is a fee to your mortgage lender, which you might be asked to pay if you want to reduce the amount you've borrowed, perhaps by paying off a lump sum.
If you’ve got a mortgage with a fixed, capped or discounted interest rate product, your lender might apply an early repayment charge if you do this during the term of the special rate product. However, the charging period might sometimes run beyond that point.
You might also be asked to pay an early repayment charge if you change to a different mortgage interest rate product before your current one expires.
Types of complaint we see
If you’re unhappy that your lender’s applied an early repayment charge, it might be because:
- you think the charge is unfair or too much
- your lender didn’t tell you about the charge when you took out the mortgage
- you weren’t told about the charge when you asked your lender about paying off some (or all) of your mortgage
- your lender turned down your application to transfer your interest rate to another property, and has charged you because you’ve had to take out a mortgage with a different lender
- you don’t think the early repayment charge amount compared to how long you have left on the fixed rate period is fair
- you were charged after your house was repossessed
How to complain
What we look at
To decide whether your lender’s dealing with you fairly, we’ll look at:
- legal and regulatory standards – for example, whether your lender followed the FCA’s Mortgage Conduct of Business rules (MCOB)
- the terms of your mortgage agreement, which should set out when an early repayment charge will apply
- whether your lender properly explained the charge to you before you agreed to take out the mortgage product
- how your lender has applied the charge, taking into account your personal situation – particularly if you’ve got money worries
We’ll ask the lender to show us how the charge was calculated. We often find these calculations contain commercially sensitive information, and that means we’re unlikely to be able to share the details with you. However, we will review the evidence thoroughly and decide if the lender calculated the charge fairly.
We also consider the underlying reasons that have led to the charge, and whether those reasons are the result of unfair treatment. And we’ll decide whether it was fair for the lender to apply the charge in those circumstances.
Putting things right
If we decide your lender’s not being fair, some of the ways we’ll ask them to put things right include:
- waiving or refunding some (or all) of the early repayment charge
- paying you compensation for any additional costs – for example, if you’ve been charged more interest because you had to borrow extra on your new mortgage to pay the charge
- paying you compensation for any distress or inconvenience you’ve experienced
‘I couldn’t transfer my mortgage to another property because the lender changed its age limit’
'I've been charged because my lender wouldn't agree to my request for a larger mortgage'
'My lender didn't say there'd be an early repayment charge when I asked about redeeming my mortgage'