Thanks for that Glenn. I'm a solicitor so I know that it's winning in court that matters. It usually helps to win in court when if are right (I meant right in law - it wasn't a moral point). I could argue the case myself- but if the courts are going against this I won't do so until I know why. It might just be that the points haven't yet been compellingly argued, or it might have been that they have been properly argued but rejected as point of law. I haven't seen anything in the reports of lost cases to make me think the arguments I've thought through on this are not credible. There are of course differences but they are not as clear cut as the lenders would have you believe. If it wasn't for the consumer credit act, I think there would almost certainly have been a court finding that these types of clauses are subject to the rule against penalties. Having said all that, it's all a bit up in the air at the moment and I won't be issuing a claim until I know more. There is no point throwing good money after bad after all, depth of pockets notwithstanding.

That is indeed the question. I still think I'm right though!

Not sure I agree. I think there are good arguments that the ERCs could be covered by the law against penalties. There are some very pertinent judicial statements on exactly this point. It looks though as if the courts are currently rejecting these arguments - they are still good arguments though. In my view the no breach = no penalty is too simplistic.

Thanks Zooman - interesting thoughts. I agree with you about the fairness issue. My feeling though is that the unenforceable penalty argument does have some chance of success. Although I understand your comments about "entering the mortgage with your eyes open", this doesn't actually affect whether or not the cluase is a penalty. To establish this, you would first have to show that the ERC clause was covered by the rule against penalties despite the fact that there has been no breach of contract. My research suggests that there are some grounds for this. In particular, although ending the mortgage is a contractual right, the payment is required in order to do so. In the different but arguably analogous case of Hire Purchase Agreements, judicial statements have been made to the effect that such payments are perhaps an attempt to circumvent the rule against penalties and that this should not be allowed. There are failrly long arguments on this but that's the gist of it. If the rule against penalties does apply, it seems to me that many ERCs would fall foul of them. I have had a letter from a lender admitting that they were set at a commercial level, and not worked out on a individual borrower basis. By definition, this cannot therefore be a genuine pre-estimate of loss. It might well be that I am barking up the wrong tree with this, but I am interested to know whether you have considered and dismissed these arguments in coming to the conclusion that ERC claims have little chance of success? All the best

Im in a similar position with an ERC. I have looked into the law on this and think I have a pretty good argument that it's an unenforceable penalty (ie - becuause the charge is intended to compel continued performance, despite the fact it is not payable on breach). Do you know the legal reasons that the cases were lost? Was it all about UTCCR or was the common law, penalty point argued. If it was, and rejected by a judge, I might as well pack it in now!

I have a mortgage on a fixed rate which I need to change due personal circumstances. I am in for 10K ERC. It occured to me that this might be a penalty but this seemed such an obvious argument, I couldn't be the first to have thought of it. Having found this forum today, how right I was!I am a lawyer (though not involved in litigation or court work). I think if the ERC was expressed as payment for breach it would be an open and shut case. ERC's based on a certain percentage of the loan can in no way be a genuine pre-estimate of the loss; not least because the actual "loss" will to a large degree depend on how interest rates have moved in the meantime. In my case, rates have gone up since I took my fixed, so arguably the lender could take my repaid funds and lend to a new borrower at a higher rate, actually making a profit from the early redemption, not a loss.The actual loss that would be incurred from ending a fixed rate mortgage early is easily calculable - there are formulas to do just this based on current rates when borrowing is redeemed early. Indeed, I have seen posts from lenders on this forum where lenders expressly state that the ERC is to compensate them for the difference in interest rates between the fixed rate and the market at the time of redemption. That is fine (when rates are falling) but is still a sum capable of being properly worked out to compensate the loss -5% etc of the loan capital is just completely arbitrary.The problem it seems to me, unlike overdraft fees etc, is that they are expressed as charges, not penalties for breach. This to me seems a slightly fatuous argument in some ways - the abililty to redeem a mortgage is clearly not a "payment for a contractual right" in the normal sense, but a penalty for breach dressed up as a charge. However, I am worried that the case law still supports the lenders' position on this - and seems to be why a poster recently got stung for 4K of costs.I am writing to them anyway stating that I am willing to pay their reasonable losses even though, legally, I believe the ERC is a penalty and therefore unenforceable in its entirety.I am not sure from the posts whether anyone has actually succeeded with this argument and received a settlement from the lender?I'd love to prove that the ERCs are penalties, but 4K costs is a big gamble!