Finance Editor, Kael Tripton Ltd - LBS MBA - Verified against FCA Handbook: 14 June 2026
Quick answer
Early repayment charges (ERCs) are contractual fees for repaying a mortgage during the deal period, typically 1-5% of the outstanding loan. MCOB 5 requires disclosure in the ESIS. Most lenders allow 10% annual overpayments without triggering the ERC. If the ERC was not disclosed, challenge under MCOB 5.
What Is a Mortgage Early Repayment Charge?
Direct answer
What is a mortgage early repayment charge and can I avoid it?
An ERC is a fee for repaying your mortgage during the deal period, typically 1-5% of the outstanding balance. MCOB 5 requires disclosure in your ESIS. Most lenders allow 10% annual overpayments without triggering the ERC. If the ERC was not disclosed, challenge under MCOB 5 through the lender's complaints process and the FOS.
Check your mortgage offer for ERC terms
The ERC schedule is in your mortgage offer. Note the percentage each year and the end date.
Calculate your ERC
ERC = outstanding balance x ERC percentage. For PS200,000 at 2% = PS4,000.
Check your annual overpayment allowance
Most lenders allow 10% of outstanding balance per year without ERC.
Apply for a new deal before the ERC ends
Many lenders allow you to lock in a new rate 3-6 months before the current deal ends.
Weigh ERC against savings if remortgaging mid-deal
Calculate: monthly saving x remaining months vs ERC cost. Switch if savings exceed ERC within a reasonable period.
Related KT guides
Early Repayment Charges and Consumer Duty: Fair Value Assessment
Under Consumer Duty Outcome 2 (effective July 2023), mortgage lenders must demonstrate that the overall product -- including the ERC structure -- represents fair value for customers. The FCA has been reviewing whether high ERC percentages combined with long tie-in periods represent fair value, particularly for customers who need to exit the product early due to life events such as relationship breakdown or redundancy. If you are facing an ERC due to unforeseen circumstances, write to your lender requesting a Consumer Duty fair value review of the ERC in the context of your circumstances. Some lenders have discretion to reduce or waive ERCs in genuine hardship cases.
Frequently Asked Questions
What is a mortgage early repayment charge?
An early repayment charge (ERC) is a fee charged when a borrower repays all or part of their mortgage during a tie-in period -- typically the duration of a fixed or tracker deal. ERCs are expressed as a percentage of the outstanding loan and reduce over time. The FCA requires ERCs to be disclosed in the ESIS under MCOB 5.
How much can an early repayment charge be?
The FCA does not set a maximum ERC. For fixed-rate mortgages ERCs typically range from 1-5% of the outstanding loan, reducing each year. For a PS250,000 mortgage with a 3% ERC, the charge is PS7,500. Most lenders allow overpayments of up to 10% of the outstanding balance per year without triggering the ERC.
Can I challenge an early repayment charge?
ERCs are contractual. If clearly disclosed in your ESIS and mortgage offer, the charge is legally enforceable. You can challenge if: it was not disclosed before you accepted the mortgage (MCOB 5 breach), it is being applied incorrectly, or the lender has not honoured a disclosed overpayment allowance.
Do I pay an ERC when I remortgage to a new lender?
Yes, if remortgaging during the ERC period. Some lenders allow porting (transferring) the mortgage to a new property without triggering the ERC. Many lenders also allow you to lock in a new rate up to 6 months before the ERC expires.
What is mortgage porting?
Mortgage porting is transferring your existing mortgage deal to a new property, preserving the interest rate and avoiding the ERC. Not all mortgages are portable. The lender must agree to the port and will assess the new property and run an affordability check.
Primary sources
Kael Tripton Ltd is registered with the Information Commissioner's Office under registration number ZC135439.
