Early Repayment Charge FAQs
What is an Early Repayment Charge?
A fee, usually 1% to 5% of the outstanding balance, for repaying or leaving a fixed or discounted deal early. Most fixes step down each year · e.g. 5%/4%/3%/2%/1% across a five-year fix. Your exact schedule is in the mortgage offer document, and it is worth checking: the difference between 3% and 2% on a £250,000 balance is £2,500.
Is paying the ERC ever worth it?
Yes · when the interest saved at the new rate over your remaining fix period beats the ERC plus the new arrangement fee. Large balances, big rate gaps and long remaining periods favour switching; a 0.5% gap rarely covers a 3% charge. This calculator nets it off month by month and shows the break-even.
How can I avoid the ERC entirely?
Wait and switch on time · mortgage offers last up to 6 months, so lock a new deal half a year before the fix ends. Use the 10% annual overpayment allowance rather than repaying fully. Port the mortgage if you move house. And some lenders waive the ERC in the final 3 months of the deal · ask.
Should I lock a new rate before my fix ends?
Almost always yes. Securing today's rate to start at fix-end costs nothing and protects you if rates rise; if they fall further before completion, most lenders and brokers let you re-select the cheaper product. It is the risk-free version of this whole decision.
Does the ERC apply to overpayments?
Only beyond your allowance. Most deals permit 10% of the balance per year penalty-free; the ERC rate applies to the excess. Check whether your lender calculates 10% of the original loan or the current balance · it changes the headroom meaningfully late in the term.
For informational purposes only · Not mortgage advice · Compares interest costs over the remaining fix period assuming both routes end on the same product afterwards · Check your actual ERC schedule and get broker advice before breaking a fix