Given that the mortgage market is very competitive many mortgages are sold as 'loss leaders' ie the mortgage has to be held for a number of years before the lender breaks into profit.

As a consequence lenders frequently 'lock-in' borrowers by applying Early Redemption Charges for those paying off the mortgage early.

Charges can be significant e.g. 6 months interest or repayment of the amount of benefit received, be it cashback or reduced interest.

The period an Early Redemption Charge applies can vary.

Sometimes it will match the period of the discount/fix but often it can go beyond the benefit period eg. a 5 year discount with a 7 year ERC.

This is referred to as a 'redemption overhang'.

For more information about Early Redemption Charges, contact one of our independent advisers.