Glossary · UK
What is Early Repayment Charge?
A fee some lenders charge if you repay or overpay your mortgage beyond agreed limits during a fixed or discounted deal period.
Full Definition
An early repayment charge, often shortened to ERC, is a fee a lender may apply if you pay off your mortgage, switch to another lender, or overpay beyond an allowed amount while you are still within an incentive period such as a fixed or discounted rate. It compensates the lender for interest it expected to receive over the tied-in term. The charge is usually a percentage of the amount repaid, and it commonly reduces each year as you move through the deal, for example stepping down over the length of a multi-year fix. The exact percentage and structure vary by lender and product, so always check your mortgage offer or key facts illustration for the precise terms. Many deals allow penalty-free overpayments up to a set limit each year, often around ten percent of the balance, which can help you reduce the loan without triggering a charge. Early repayment charges matter most if you might move home, remortgage early or come into a lump sum. Once your deal period ends and you move onto the standard variable rate, an early repayment charge generally no longer applies, giving you freedom to switch.