Santander UK Plc · DRN-6160093

The complaint Mr and Mrs S are unhappy that they incurred an early repayment charge (“ERC”) on their Santander UK Plc mortgage after it turned down an application they made to port their mortgage to a new property. What happened Mr and Mrs S held a mortgage with Santander that they’d taken out in 2022. Their 2022 mortgage offer showed they were borrowing £180,000, over 22 years on a repayment basis. It said the interest rate was fixed at 2.94% until 2 September 2027, and if the mortgage was repaid before that date an ERC would be incurred. In 2025 Mr and Mrs S decided to sell their property and buy a new one with some family members, and so they approached Santander to ask about porting their mortgage to a new property, increasing the borrowing amount and adding the family members onto the mortgage. They were told it was possible, but when checks were done Santander declined the application due to the amount of secured credit held by the family members which meant the application fell outside its risk appetite. Unhappy with that a complaint was raised, which Santander responded to in August 2025. It said the lending decision wouldn’t be changed, and a request would be made to have the ERC reduced as Mr and Mrs S would now be redeeming the mortgage with Santander, but there was no guarantee it would be approved. The mortgage was then repaid in October 2025, with Santander agreeing to reduce the ERC from 5% to 3%. In the meantime, the complaint was referred to our service where it was looked at by one of our Investigators. He didn’t uphold the complaint saying that the ERC was set out in the contract and was fairly due when Mr and Mrs S redeemed their mortgage, albeit Santander made a concession to reduce the ERC from 5% to 3%. Overall, he wasn’t persuaded Santander had done anything wrong. Mr and Mrs S didn’t agree and so the case was passed to me to decide. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I recognise that Mr and Mrs S feel very strongly about this, and I thank them for the thoroughness of their submissions. Although I’ve read and considered the whole file I’ll keep my comments to what I think is relevant. If I don’t comment on any specific point it’s not because I’ve not considered it but because I don’t think I need to comment on it in order to reach the right outcome.

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I’ve carefully considered all the information and evidence provided, and having done so I don’t uphold this complaint. I’ll explain why. A mortgage loan and a mortgage product are two different things. A loan is the underlying transaction in which money is lent; the product is the terms that sit on top. For example, an agreement to borrow £100,000 over 25 years is a mortgage loan; an agreement that for the first two years a fixed interest rate rather than the standard variable rate will apply is the mortgage product that sits on top. In moving house, a borrower pays off their old mortgage with the proceeds of the sale. They also, and separately, apply for a new mortgage to fund buying the new property. A lender will consider the new application on its own merits. If it’s prepared to grant a new mortgage, it will then consider whether to port across the old product – if the terms of the old product allow it. These are two separate decisions. If a lender isn’t prepared to grant a new loan, then porting can’t happen, and so the mortgage product ends with the old loan; depending on the product terms, an ERC may be payable. Looking at the mortgage offer I think it was made sufficiently clear that while porting was a feature of the mortgage product there were conditions attached, one of which was “You must also meet our lending criteria and pass our affordability assessment at the time.” The mortgage offer also explained an ERC of 5% of the amount repaid would be charged if the mortgage was repaid on or before 2 September 2027, and it explained the maximum ERC would be £9,200. The ERC wasn’t a “penalty” as that has a distinct meaning in law; it’s a contractual term that applies where there is a breach of contract. But when Mr and Mrs S chose to repay their mortgage during their fixed rate term, there was no breach of contract. That’s because the contract allowed for the mortgage to be repaid if Mr and Mrs S paid an ERC. We’re not the regulator, and I’ve no power under our terms of reference to comment on, or otherwise determine, how financial businesses operate in general terms. I have to consider this complaint by reference to Mr and Mrs S’ particular situation. When I do that, I’m satisfied the terms of the ERC were set out in the mortgage offer in a way that should have been readily understandable to Mr and Mrs S; certainly, the information about the ERC was set out in a manner that met the regulator’s requirements. So I’m persuaded Mr and Mrs S knew – or at least should have known – how much they’d have to pay if they repaid the mortgage during the fixed rate period. Mr and Mrs S have said their concern isn’t about their awareness of the ERC, but whether Santander met the conditions required to make the charge enforceable. I understand Mr and Mrs S, and their family members, were unhappy about the decision to decline their application, but I’ve issued a separate decision explaining why I’m satisfied the decision to decline the application wasn’t unfair as the application didn’t meet Santander’s lending criteria. Mr and Mrs S’ 2022 mortgage offer was clear that if they redeemed the mortgage early they would have to pay an ERC, and having considered everything, there’s no reason for me to say the ERC term isn’t enforceable. Santander reduced the ERC from 5% to 3% and that goes far beyond what I would have ordered it to do had that offer not already been made. For the reasons given above there are no grounds for me to order Santander to refund all, or part, of the ERC.

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My final decision I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr and Mrs S to accept or reject my decision before 24 April 2026. Julia Meadows Ombudsman

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