Foodguru ERC Claim

[Foodguru]

Hi there,

 

I actually have 3 mortgages which I am about to redeem which will be subject to very hefty ERC's:-

 

1. Commercial First: ERC of £7,723.48 (6% of loan)

+ redemption Fee of £200

 

2. Mortgage Express: ERC of 6 months Interest: ERC of £3,385.80

 

3. Mortgage Express/GMAC: ERC (3% of loan), approx £3,600

 

I would like to work on claiming these charges back.

 

Summary of position on these is:-

 

1. Commercial First: The broker - Black & White sold me on a Prime Investor product from Commercial First. The loan is for a commercial premises. At the last minute I was switched to a far less favourable product with higher interest (5.5% Margin over LIBOR) and a very hefty ERC penalty. This was because of a payment holiday offered by the previous lender Natwest Bank which affected the payment history on the account.

 

The original product offered was 3.5% over LIBOR and far lower ERC's. Due to other commitments and the delays in getting this mortgage decision ended up with time constarints and had to go ahead with it. The broker said thet Commercial First would switch me back onto a better product after a year of good track record. However, this has not been the case and they have offered only a wstich ot a slightly lower interest rate product but to still charge ERC's of 3% of the original loan and 0.975% Arrangment Fees! Have arranged a new loan with another high street lender at far better terms all round and am about to switch. Once completed I would like to reclaim the ERC's from Commercial First or Black and White. What do you suggest I do? Ehat are my chances?

 

2. Mortgage Express. The broker (Mortgages for Business) mad an error and for some reason I got switched onto the wrong buy-to-let product. I signed thinking it was the product agreed at consultation as I had been very clear in requesting a producyt that had no ERC's. I have correspondence from the broker admitting their error as they had "ommitted to completely annotate bpoth the rate and features" of the product on the header sheet. The actual rate picked was 0.01% different from the agreed rate and attracted hefty ERC's. Mortgage Express have offered to refunbd 50% of the ERC provided I go with anew buy to let mortgage with them with a 2 year tie in within 6 moths of redeeming the current one. This I am unlikely to do withhin the timeframe. The interest savings between the product I had been sold and agreed to and the one I ended up with is miniscule at 0.01% however the ERC is massive. I feel that this is a totally unfair situation and have the paperwork trail of e-mails and correspondence from the broker to me and M Express in my files. What do you sugest I do?

 

3. The above buy-to-let mortgage is subject to and ERC 3% until 1/10/08. It was taken up in 1/10/06 with GMAC and was subject to a 4% ERC if redeemed duyring the first year. (M Express have bought GMAC out or at least this part of their business). How should I approach this one?

 

Thanks for your help

[alanfromderby]

Moved post to new thread in correct forum.

[steven4064]

ERCs are very different from normal bank charges and quite a few people have lost cases in court trying to reclaim them.

 

You have to prove that the charge is either unfair under the UNfair Terms in Consumer Contracts Regulations 1999 or that they are contract penalties. In your case, as your mortgages are buy to let and therefore commercial mortgages, it is probable that the UTCCR1999 do not apply (you are not a consumer). You are keft with showing that the ERC is effectively for breach of contract. My underestanding of the problem is that mortgages do not constitute contracts in the same way as other credit agreements (eg credit cards) do. If there is no contract there can be no breach of contract and therefore no penalties for breach of contract.

 

Your case 2 is slightly different. You were mis-sold the product by the broker and there may be some comeback there if you can prove you were led to believe (in writing?) that you were buying a mortgage with no ERC. You may be avle to claim the ERC back from the broker if you have to pay the charge. However, I don't know whether anyone else has dome this.

 

I will flag up and see if any of my colleagues would like to comment/correct/elucidate.

[Castlebest]

You have to be careful with mortgage agreements. it is common for the ERC clause to be written into them which puts you on very thin ice because these are documents you have signed to agree the loan.

 

pete

[steven4064]

Thanks pete - you are right. There were several cases a while ago reported on CAG that actually went to court and were lost because, in each case, the claimaint was unable to demonstrate they had a contract. No contract- no contract penalties. Details here: http://www.consumeractiongroup.co.uk/forum/mortgage-companies/62003-important-mortgage-claimants-please.html

 

These also may be useful

 

http://www.consumeractiongroup.co.uk/forum/mortgage-companies/71299-mortgage-exit-admin-fees.html

 

http://www.consumeractiongroup.co.uk/forum/mortgage-companies/64323-mortgage-exit-fees-halifax.html

 

 

 

[Foodguru]

Thanks Steven and Pete,

 

I take on board your points regarding these commercial mortgages and feared this would be the case. I will contact Commercial Frist nonetheless and see what response I get. regarding case 2 I am seeking recourse through the broker. Case 3 - I have decided to keep that property for thew time being as the ERC does not apply after Septemeber 30th of this year.

 

Any suggestion on a template letter or wording I should incorporate when writing to Commercial First? By the way the broker (Black and White) did mislead me by stating that the lender would transfer me to a premium product after a year of demonstrable good account conduct. However, this is not the case - they have no such policy in place.

 

Regards

 

Sheena

[steven4064]

By the way the broker (Black and White) did mislead me by stating that the lender would transfer me to a premium product after a year of demonstrable good account conduct. However, this is not the case - they have no such policy in place.

They didn't put this in writing by any chance?

[Foodguru]

Hi there,

 

No -unfortunately this was just verbal. However, this was stated on more than one occasion to me by the broker as I raised the issue with him at least 2 times asking for re-assurance which he gave me verbally. I have done a spreadsheet comparing the originally recommended product and the one I got switched to at the last minute:-

 

Any suggestions on reclaiming these charges would be much appreciated!

 

Loan Start Date: 15/06/2006 Product 1Product 2DifferenceMargin 3.00%5.50% ERC %Yr13%6% Yr22%6% Yr31%6% Yr40%1% ERC Actual £7,723.48£2,574.49£5,148.99Extra Interest per annum£3,223.18Total Extra Interest over loan period£5,015.80Total Extra cost of loan: Product 2 £10,164.79Note!Client switched from [product 1 to product 2 at the last minuteReason: Payment holiday with previous loan with Natwest with 1 missed payment

Broker stated that lender would swich client back to Product 1 after client

demonstrated good account mangement over 6-12 month period

Lender did not action this switch even though payment history was

impeccable.

Loan Period = 18 months and 25 DaysStarting Balance: £128927.15Loan redeemed : 10/01/2008