Do early repayment penalties applied to tracker mortgages?

M

michaelsu

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Original question edited to make more sense - Brendan

Hi, does the paragraph below apply if I choose a tracker mortgage?


The banker knew I was looking for a tracker but offer letter came in saying this is Variable..


Does this formula apply if I switch my mortgage after 3 years?

Part of an offer letter:
'' Early repayment '' - In case of fixed rate loan, in the event of early repayment of the loan in whole or in part for any reason, or conversion to a variable interest rate, or other fixed rate within the initial fixed rate period or any further or subsequent fixed rate period, the Borrower will be liable to pay sum to be calculated in accordance with the following formula: (Amount x (R-R1) x Time ) divided by 36500 and for the purposes of this formula, the variables are defined as follows: .... ....
 
Re: Consumer credit act notice - need advice

That notice applies only to fixed rate mortgages.

A tracker mortgage is a type of variable rate mortgage and there is no penalty for paying it off early.

Brendan
 
thank you, I did mention on my conversation with bank that I want a fixed mortgage for 2 years and later after that continue with a tracker mortgage, on tha original application form was no box to tick that would say Tracker Variable, so banker did tick a box that says: Variable and he mention to me that I can change it at any time and this is only to get an approval quickly..At a time of a discussion bank did offer to me a fixed period for 2 years and 4.65 %.
finally a letter of offer came in and is saying Variable @ 5.1% nominal and 5.3 % APR

Is this variable mortgage or is it tracker as I am not sure if banker is trying to screw me by sending this offer letter.
Any advise on this situation ?
 
Some lenders will offer you a fixed rate with a tracker rate at the end of the fixed priod. Most will offer you a fixed rate, but you won't know what rate you'll get until the end of the fixed rate.

If you have requested a tracker, ask the lender to put in writing to you that the rate is a fixed margin over ECB for the duration of the loan.
 
If I ask that the rate is a fixed margin over ECB for the duration of the loan, will that not be a breache of contract (loan) if I decide to switch ie. year 4th as I wrote above that there is a formula that apply to a fixed mortgages, my question is as follows is the fixed margin just another type of a fixed contract in Bank eyes ?
 
No. Penalties apply only to breaking a fixed interest rate. A tracker mortgage is a variable rate loan and as long as the property in question is your family home, it is illegal for a lender to charge a penalty for redeeming any variable rate loan secured on it. Consumer Credit Act 1995.
 
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