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Early Repayment Charge

Early Repayment Charge

In other words

Formerly known as a redemption penalty, an Early Repayment Charge (ERC) is a fee levied by lenders to discourage borrowers from

Definition

Formerly known as a redemption penalty, an Early Repayment Charge (ERC) is a fee levied by lenders to discourage borrowers from switching mortgages before any special rate period has expired. Most fixed, discounted or capped rate deals have ERCs in place.

For example, if you took a two-year fixed rate, the ERC would usually apply for two-years.

Some deals do not have ERCs and are hugely popular because borrowers are free to switch to a more competitive deal at any time. However, some deals, especially many of the most eye-catching low rates on the market, have extended ERCs that can last for many years after the special-rate period has expired. Borrowers are then locked into the much more expensive Standard Variable Rate and will usually end up paying back any savings they made by taking the cheap deal in the first place.