Reduce Redemption Charges: Government

Reduce Redemption Charges: Government

The Government is urging lenders to consider alternatives to early repayment charges to encourage the take-up of long-term fixed rate deals.  

A report from The Treasury states: “Lenders have scope to manage the pre-payment risks associated with medium and long-term fixed rate mortgages in a number of ways, apart from Early Repayment Charges”.  

The Government is calling for lenders to consider transferring pre-payment risks to skilled investors able to deal with borrowers repaying loans early.  

Our view

This is difficult.  Government wants stability.  Lenders need to make a profit.  Unless the Government is going to commit to longer term competitive lending itself without penalty then we do not see how the wholesale money market would be able and therefore, how can a high street lender offer 25 year mortgage deals without the penalty.

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