Introduction of Early Redemption Charges (ERCs) to all new products
We have today introduced Early Redemption Charges (ERCs) for all new Buy-to-Let (BTL) and Home Purchase Plan (HPP) fixed rate products in line with common practice within the home finance market.
In addition, we are pleased to advise that these products will permit customers to make Additional Acquisition Payments (AAPs) (or ‘lump sum payments’) at any time, allowing them to pay off some or all of their outstanding finance balance early.
Customers on existing products will now be permitted to make Additional Acquisition Payments at any time after the end of their Fixed Rental Rate Periods - not only on Rent Review Dates.
The content below explains both changes in more detail.
Early Redemption Charges (ERCs)
The ERC fee structure is outlined below and will be charged based on the original product term, the period outstanding since completion of the finance and the amount of the finance redeemed early:
|Product/Term||Year 1||Year 2||Year 3||Year 4||Year 5|
|2 Year Fixed HPP or BTL||2%||1%||n/a||n/a||n/a|
|5 Year Fixed HPP or BTL||3%||3%||2%||2%||1%|
Additional Acquisition Payments (AAPs) features include:
- Customers will be able to make Additional Acquisition Payments of up to 10% of their outstanding balance in each anniversary year (year since completion of the finance) free of any ERCs. If the customer pays more than the 10% in any one anniversary year, an ERC will be charged on that extra payment.
- The minimum amount per AAP is £2,000. These payments can be made at any time in the year and will not be limited to Rent Review Dates.
- All AAPs must be made via lump sum reductions. We will not offer customers the option to increase their Direct Debit to make overpayments on a monthly basis.
- If the customer redeems in full during the Fixed Rental Rate Period and has not utilised their 10% allowance in the anniversary year that the payment is made, the amount up to the 10% will not incur an ERC.
- If a customer has a simultaneous redemption and completion of another finance application with us for the same amount or more, then the ERC will be waived. If the new finance is for less than the amount redeemed, then the ERC will be apportioned on a pro rata basis.
- If an ERC is paid and a customer submits a new application, for the same or higher amount, within 3 months of the redemption, the ERC will be refunded on completion of the new finance. If the amount of the new finance is less than the amount redeemed, then the ERC refund will be made on a pro rata basis.
- AAPs that are not utilised in any anniversary year will not be transferrable to another year.
We will honour all existing DIPs on current terms, however any you wish to progress must proceed to a fully packaged application, including the customer's signature, prior to the DIP expiry date. Any applications or offers that expire will only be renewed on the new product terms.
Please note, to provide advice on HPP products you are required to hold specific HPP permissions with the FCA.
If you have any queries or require further information our team remains available via phone and email, details of which can be found here.
Thank you for your continued support.