I moved house (in the UK) 6 months ago and took out a five year mortgage with rate fixed at 1.76% for the life time of the mortgage.

Currently the top paying 3 and 5 year fixed savings account are paying around 4.8% to 4.9% (per moneysavingexpert.com) so financially it seems a no brainer to put any excess savings into that rather than pay off my mortgage early.

Certainly I would be massively disincentivised from paying off more than 10% of the outstanding balance in any one year as then I would be paying additional early repayment charges as well as forgoing the difference in interest rates for the excess amount repaid.

Will the bank be making a loss in this scenario (where essentially I can make a profit by just reinvesting the mortgage amount they lent me into savings)? And if so would they be likely to agree to waive early repayment charges to get out of it?

  • Why would you want them to? Nov 27, 2022 at 17:07
  • @GS-ApologisetoMonica gives more flexibility if I want to move again before the 5 years and potentially just nice to be mortgage free. Nov 27, 2022 at 17:14
  • In Germany, back when I had a mortgage there, the law was that you have the right to pay back your mortgage without penalties if your interest rate increases. Never heard of something like that in the UK.
    – gnasher729
    Nov 28, 2022 at 17:48

1 Answer 1


Banks typically fund fixed-rate mortgages from the wholesale interest rate swaps market, so it's unlikely that they're actively losing money on your loan. That said, if you do overpay it they would make an unexpected profit as they'd also be able to invest the repaid money at a higher rate.

I'm not aware of any banks offering to waive early repayment charges even if they can make a profit from repayment, but of course that's not a definitive statement that they won't.

However I can think of a few reasons that would work against them wanting to offer this:

  • Making a policy on when to grant such requests is admin effort itself.
  • Saying that they will waive the charge sometimes might invite complaints from people who they don't do it for. A blanket "no" reduces the risk of that.
  • They only gain from waiving the charge if the person wouldn't have paid it anyway. Someone who needs to move might be willing to pay it regardless.

So overall my gut feeling is that it's unlikely.

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