Am I trapped by early repayment penalties?

Q I have a repayment mortgage with an interest rate that was fixed for five years from 2001. Even though I am coming towards the end of the fixed period, I would still have to pay 3% of the value of the loan (?6,000) if I sell up now and repay the mortgage.

Is it fair and legal for the mortgage company to impose such a severe penalty even towards the end of the five-year period when their "extra expenses" incurred by "medium and long term financial commitments" must surely be significantly lower?

NG

A Assuming the mortgage lender made you aware of the nature and amount of the penalty before you entered into the mortgage, yes, such a charge is perfectly legal.

If - and I suspect that this is not the case - you were blissfully unaware of the fact that you'd be penalised for getting out of the fixed-rate deal early, you would have reasonable grounds for complaint and should ask for details of the lender's formal complaints' procedure.

But if what you are really worried about is having to pay the fee because you are moving house, it would be worth asking your lender if it is among those which doesn't charge the penalty fee if the reason for repaying the loan early is that you are buying a new property.

Some lenders waive the fee if you take out a new mortgage with them - but of the same amount and on the same fixed terms as your current loan - on a different property. If you need a bigger mortgage than your current one, it's likely that any additional amount you borrow over and above the fixed-rate part will be at the lender's standard variable rate.