Not upheld: early repayment charge (ERC) application complaint against Bank of Ireland (UK) Plc

Decision detail

Summary

Mr C and Mrs L complained that they were charged an early repayment charge (ERC) of approximately £5,040 when they redeemed their mortgage with Bank of Ireland on 18 July 2025, just 44 days before the end of the fixed rate period on 31 August 2025. They had relocated for Mrs L's work and were unable to port their mortgage. The ombudsman found that the ERC was a contractual term calculated on a group basis as a reasonable pre-estimate of early termination costs, which is permitted under FCA rules. The terms were clearly disclosed in the mortgage offer, and Mr C and Mrs L were aware of the ERC amount before deciding to repay. The complaint was not upheld, and no remedy was ordered.

The Ombudsman's reasoning

The ombudsman found that the ERC was a contractual term allowing early repayment if the charge was paid, not a penalty for breach of contract. The ERC was calculated on a group basis as a reasonable pre-estimate of costs, which is permitted under MCOB rules. Lenders are entitled to project average early termination rates across similar mortgages and apportion costs accordingly, resulting in over-calculations for some individual mortgages and under-calculations for others. The terms were clearly disclosed in the mortgage offer, and Mr C and Mrs L were aware of the ERC amount before deciding to repay. The Consumer Duty did not apply as the mortgage predated its introduction on 31 July 2023. The proximity to the end of the tie-in period and the apparent disproportionality of the charge were not relevant factors in ERC calculation methodology.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website