Mortgage Fees Face Test In Landmark Welsh Case

[The Masked Tulip]

A BUSINESSWOMAN who was charged £9,000 for paying off her mortgage early is taking her grievance to the High Court in a landmark test case likely to affect thousands of borrowers.

Annie Brown, 44, says she was horrified when she was hit with the bill by lender Birmingham Midshires, part of the Halifax Bank of Scotland group.

She bought a house at Rey-noldston, Gower, in September 2005. A broker arranged her £150,000 mortgage, repayable over 25 years.

Several months later, Ms Brown and her partner Peter Rees decided to move to Menorca, where Ms Brown planned to teach English and perhaps open a restaurant. She said: “I was horrified to be charged a mortgage exit fee of £9,000, which was deducted from the amount I received when I sold the house.

A spokesman for MHB Solicitors (Wales), which runs a specialist legal research team, said: “Now that Ms Brown’s case has been scheduled in the High Court, we would like to hear from people who were charged Mortgage Exit Administration Fees between 2000 and 2008, especially those whose lender was Birmingham Midshires.

“We feel it would be cost-effective for all parties concerned if Birmingham Midshires could repay excessive

http://www.walesonline.co.uk/news/wales-ne...91466-21308096/

[1929crash]

http://www.walesonline.co.uk/news/wales-ne...91466-21308096/

We need a "repayment of scandalous and immoral banking charges" bubble.

[redgenieuk]

£9,000 x how many exits a year? Lets say 1000.

x 8 year.s

£72,000,000

Bye Bye Birmingham Midshires.

[Liquid Goldfish]

I can't see the basis for this claim against the lender. Seems rather desperate to me.

Like the plaintiff, I took a fixed rate mortgage with Birmingham Midshires. The Early Redemption fee was very clearly stated and I was totally aware of it when I took out the mortgage. I too paid off my fixed rate early when I had to sell because of relationship breakdown, although by that time my fee had come down down to only 2%. This person must have redeeemed very early in the term to be stuck paying 6%.

Maybe the broker can be held responsible for not advising properly

[The Masked Tulip]

I can't see the basis for this claim against the lender. Seems rather desperate to me.

Like the plaintiff, I took a fixed rate mortgage with Birmingham Midshires. The Early Redemption fee was very clearly stated and I was totally aware of it when I took out the mortgage. I too paid off my fixed rate early when I had to sell because of relationship breakdown, although by that time my fee had come down down to only 2%. This person must have redeeemed very early in the term to be stuck paying 6%.

Maybe the broker can be held responsible for not advising properly

Does the above posted on an Internet site now absolve you of any right to join in the 'class action' lawsuit? How will you feel if everyone else gets their money and you don't because of this posting. You do realise that we are all being monitored don't you.

Perhaps they are going to challenge the existence of an early redemption fee generally?

Anyhow, what do I care. I ain't got a mortgage.

[impatient_mug]

Don't see the problem with early redemption fees. Mortgage companies give you massively discounted rates, and in return, you agree to stay with them for X years. If you want to break the agreement, you pay a punitive fee - normally a percentage of the outstanding loan. My initial 2 year fix offered 5.5%, but if I wanted out early, I paid 5% in the first year, and 3% in the second. The 5 year fix I just signed up to is 6.3%, with early repayment on a sliding scale starting at 10%, dropping by 2% each year.

I'd rather have a cheaper rate and a penalty I'll never realistically have to pay than a higher interest rate.

[Liquid Goldfish]

Does the above posted on an Internet site now absolve you of any right to join in the 'class action' lawsuit? How will you feel if everyone else gets their money and you don't because of this posting. You do realise that we are all being monitored don't you.

Perhaps they are going to challenge the existence of an early redemption fee generally?

Anyhow, what do I care. I ain't got a mortgage.

I won't be seeking my money back. I knew what I was doing. I took a fixed rate for certainty knowing that there was a trade off if I left early. Someone can't always be blamed when somethign we don't like happens - it's not the USA.

This "businesswoman" doesn't seem to read contracts she signs - wonder how well she's doing

As a lawyer, I would like to know the basis for this claim though. Unfair contract terms presumably? Not my area of speciality though.

[bomberbrown]

I haven't got a mortgage and even I know there are huge early settlement fees involved. She agreed to pay them interest for 25 years, which the BM have factored into their business model, and now she wants to renege on that agreement. How on earth does she expect them to make money?

No sympathy for the whinger.

</sensible head and sick of litagous whingers mode>

[impatient_mug]

I haven't got a mortgage and even I know there are huge early settlement fees involved. She agreed to pay them interest for 25 years, which the BM have factored into their business model, and now she wants to renege on that agreement. How on earth does she expect them to make money?

No sympathy for the whinger.

</sensible head and sick of litagous whingers mode>

It's worse than that - the fee will only have applied for however long she's on a discount rate for - generally between 2 and 5 years. After that, you're free to leave whenever you want. Even during the discount periods, you're generally allowed to pay off up to 10% of the outstanding loan each year for free - this woman doesn't have a leg to stand on imho. However, we've all seen strange decisions from the courts before...

From a HPC perspective, this woman winning would be great - special offers would go straight out the window, very bad for late entry BTLers and OOs who over-stretched.

[papag]

On these fixed deals arragement fees are now around 2K few borrowers have this spare so they just add it to the original debt, the new deal usually ends every 2-3 years with the sheeple again adding this to their mortgage debt, lots will never pay off the debt and also be stuck with the stringent rules of the fixed rate deals.

Very sad prospects for UK PLC :angry:

Edited July 9, 2008 by papag

[fluffy666]

On these fixed deals arragement fees are now around 2K few borrowers have this spare so most are just the deal usually ends every 2-3 years with the sheeple again adding this to their mortgage debt, lots will never pay off the debt and also be stuck with the stringent rules of the fixed rate deals.

Very sad prospects for UK PLC :angry:

I think there is a much stronger case to outlaw arrangement fees, in the same way that taxes and fees have to be shown as part of air fares now.

But I can't imagine she didn't realise there were early exit penalties, it's not exactly hidden in the small print.

[Bloo Loo]

I wonder what her claim is.

Its a contract with a fee for early redemption.

Shes redeemed early, hence the condition is now active.

Maybe she is claiming its an UNFAIR term.

Maybe she is claiming on the grounds that the fee is excessive.

I think she and her lawyer are deluded.

If not, I shall be going back to Sinusbiries and claiming back the excess between their beans and those at Ilda and notte as their prices were excessive.

[quantinghome]

I understood that penalties in excess of the reasonable costs to the party are unlawful under English law. This is the argument being used in the overdraft fees cases. Would someone with a legal background care to comment about whether this is applicable to mortgage exit fees?

[papag]

I wonder what her claim is.

Maybe she is claiming on the grounds that the fee is excessive.

If not, I shall be going back to Sinusbiries and claiming back the excess between their beans and those at Ilda and notte as their prices were excessive.

Maybe the FSA our trusted guardian angels should get involved as to the legality, as how much does it actually take to arrange a motrtgage.Halifax have one at £3999

Bargain

[interestrateripoff]

I understood that penalties in excess of the reasonable costs to the party are unlawful under English law. This is the argument being used in the overdraft fees cases. Would someone with a legal background care to comment about whether this is applicable to mortgage exit fees?

I would assume this is what's being argued. Is £9000 a reasonable charge for paying off £90,000? The bank got it's money back in full I presume so was that really a fair charge? The bank got it's money back so it could then lend it back out again, and make more money.

The banks are out to screw people as much as possible. I hope she wins.

[Matt Bear]

I understood that penalties in excess of the reasonable costs to the party are unlawful under English law. This is the argument being used in the overdraft fees cases. Would someone with a legal background care to comment about whether this is applicable to mortgage exit fees?

I think this is based on the Consumer Credit Act. I'd be surprised if mortgages come within its remit.

[Quoth]

Interesting topic - thanks to the OP.

I paid off my mortgage a few years back and paid £3k plus in early redemption charges. I ran through the figures and it worked out cheaper to do so than pay the mortgage until I was free of the early redemption period. I also knew full well what I was getting into with the fixed rate mortage so although it was a bit galling having to pay out such a chunk of cash I accepted it.

So, this ruling, should it go in the plaintiffs favour, could raise a moral dilema. I managed to get back some of the administration fee for closing the mortgage as they had increased from what I had been contracted to - I didn't have an issue with this as they had altered the terms and I felt an entitlement to the money. In the instance of the early redemption charges I knew what my obligations were so I would have an issue with trying to reclaim that money.

...on the other hand is the single income family, second baby on the way argument... Presumably the banks involved would make a little black mark next to your name as well! I would imagine if the plaintiff was successful (which I just can't see happening) the banks would take a hammering and duly pass that on to new lenders - another nail in the coffin of HPI.

I will watch this with some interest.

Regards,

Q

Edit: can't instead of can

Edited July 9, 2008 by Quoth

[Liquid Goldfish]

I think this is based on the Consumer Credit Act. I'd be surprised if mortgages come within its remit.

It's straining my memory of contract law, but I think the principle in the bank charges case is based on common law, rather than the Comsumer Credit Act and as such is also applicable to mortgages. AFAIK it's all to do with the amount of damages a plaintiff (the bank) can claim for breach of contract. The damages must be related to the actual loss incurred by the plaintiff, and not be an arbitrary excessive amount which would be then be classed as a "penalty" which is illegal.

If the claim is under the CCA then I think you are correct that it wouldn't apply to the vast majority of residential mortgages.

There might I suppose also be questions of Unfair Contratc Terms and misrepresentation although I think that would be very unlikely

[huw]

It's straining my memory of contract law, but I think the principle in the bank charges case is based on common law, rather than the Comsumer Credit Act and as such is also applicable to mortgages. AFAIK it's all to do with the amount of damages a plaintiff (the bank) can claim for breach of contract. The damages must be related to the actual loss incurred by the plaintiff, and not be an arbitrary excessive amount which would be then be classed as a "penalty" which is illegal.

If the claim is under the CCA then I think you are correct that it wouldn't apply to the vast majority of residential mortgages.

There might I suppose also be questions of Unfair Contratc Terms and misrepresentation although I think that would be very unlikely

The losses to the bank would be the difference between the interest they would have received if the contract had been fulfilled, and the cost of the finance to them (possibly with adjustments for admin costs). Surely they make more than 9k over the lifetime of a mortgage?

[Liquid Goldfish]

The losses to the bank would be the difference between the interest they would have received if the contract had been fulfilled, and the cost of the finance to them (possibly with adjustments for admin costs). Surely they make more than 9k over the lifetime of a mortgage?

I think we're only looking at the initial tie-in period rather than the whole length of the mortgage

[Liquid Goldfish]

I've just found this summary of the law behind the bank charges case on the internet

http://www.alway-associates.co.uk/bank-charges.asp

I've only skimmed it but it seems pretty good

Of course, we're only assuming that this is the basis on which the mortgage case in the news is being brought. But it does seem possible to apply the same principle to mortgages.

[Bloo Loo]

I've just found this summary of the law behind the bank charges case on the internet

http://www.alway-associates.co.uk/bank-charges.asp

I've only skimmed it but it seems pretty good

Of course, we're only assuming that this is the basis on which the mortgage case in the news is being brought. But it does seem possible to apply the same principle to mortgages.

I havent read the above, but the case against the banks was for charging an excessive charge AS A PENALTY for the breaking of a rule.

for example, the bank says there will be a charge for writing you a letter of £20 for telling you you are unauthorised for the overdraft you have taken, whereas the law says that where a contract term is broken, the agreived party is only entitled to recompanse to cover the losses, and a penalty above and beyond the actual losses is not a fair contract term.

In the case of the lady's claim, I fail to see where the bank is an aggreived party, and the contract stipulated the costs of doing an early repayment.

i think shed have a claim if the contract said the early redemption was x and the bank charged her x+y, the claim would be for y.