Advice regarding ERC Claim

[CheeseOnToast]

Hi,

 

I am looking to pursue Birmingham Midshires for an ERC approx £2800.

 

It was fixed rate for 2 years, I bailed around 8/9 months before the end of the second year and was thus charged 2% of loan amount.

 

My concern is that my mortgage was interest only, so the £300 a month I was paying would of come somewhere in the region of £2500 etc if I had paid til the end of the second term.

 

Does this mean interest only mortgages won't really work this with this type of action?

 

Please advise as this would be excellent news for us to pay off our remaining date.

[ukaviator]

Hi Cheese on toast

 

If there is a penalty involved when closing then claim it. Same rules apply.

 

Ukaviator

[CheeseOnToast]

My concern is that the amount of interested lost in that period I should of been tied in would roughly be equal to the penalty I was charged.. which would make it proportionate.. so would that be legal?

[GraemeC]

No, wouldnt make it legal

 

Its either a liquidated damages claues (ie. a genuine estimate of their costs caused by your breach)

 

Or its a penalty

 

They may have not received income because you redeemed, but thats not the cost they incurred due to you redeeming - they have no right to that income under UK contract law if you breach, they can only recover the costs caused by your breach

 

If you had redeemed one day into the contract, what would they have charged you? If you redeemed one day before the end of the contract, what would they have charged you?

 

If the answer to this is 2% each time, then how can it the charge possibly be a pre-estimate of their costs caused by you redeeming?

[CheeseOnToast]

It was 3% year one and 2% year two so yeah it was bollocks.

 

Thanks for clearing up re the liquidation damages clause, I hadn't read about that yet which is where I found the grey area.

 

Thanks very much for taking the time to respond guys, much appreciated, I will keep you posted accordingly.

 

Cheers

 

Phil

[zootscoot]

Hi Cheesie,

 

Also worthy of note that they are under a duty to mitigate their loss. They would relend the money elsewhere on your redemption. They are not going to sit and hold on to the money until your tie in period finishes. Therefore they are not going to suffer a loss of that interest. Its their losses which count not yours.

 

All the best

 

Zoot