For many borrowers, remortgaging in 2026 is driven by a simple goal: securing a better rate, restructuring debt, or creating flexibility as fixed deals end. What often comes as a shock, however, is discovering that early repayment charges (ERCs) apply in situations they did not expect—or apply at levels far higher than anticipated.
ERC-related surprises are now one of the most common reasons remortgage plans stall or are abandoned altogether. Borrowers frequently assume ERCs only apply if they leave a fixed rate early, or that they are negligible compared to the benefit of switching. In reality, lender structures in 2026 are more complex, and ERC exposure can persist even when a deal appears close to expiry.
This issue is closely linked to wider remortgaging pitfalls discussed in The Questions You Should Ask Before Remortgaging in 2026 (That Most Borrowers Don’t), where timing assumptions often prove costly.
At Willow Private Finance, we regularly see borrowers discover unexpected ERCs only after valuations, legal work, or lender decisions are already underway. This article explains how ERCs work in 2026, why they catch borrowers out, and how remortgaging strategy must account for them from the outset.
Early repayment charges have always existed, but their structure and interaction with remortgaging has become more nuanced.
In 2026, many lenders use tiered or declining ERC structures that do not align neatly with fixed-rate end dates. Borrowers often assume that once they enter the final year—or final months—of a deal, penalties either disappear or become immaterial. That assumption is increasingly wrong.
In addition, some lenders now apply ERCs not just to full redemptions, but to partial capital repayments beyond annual allowances, loan restructuring, or even certain internal product switches. This becomes particularly relevant where borrowers are consolidating debt or adjusting loan structures, as explored in Remortgaging With Multiple Loans in 2026: What Lenders Actually Assess.
As a result, borrowers are encountering ERCs in scenarios they did not anticipate—and often at a point where reversing course is difficult.
One of the most frequent triggers is remortgaging shortly before a fixed rate expires. Many borrowers assume the penalty window closes exactly at the end of the fixed term. In practice, ERCs often apply until the completion date of the new mortgage, not the application date, and delays can push completion back into the penalty period.
Another common issue arises when borrowers attempt to restructure their mortgage rather than simply switch lender. Combining multiple parts, changing repayment types, or altering loan terms can trigger ERCs even where the lender remains the same.
Unexpected ERCs also arise where borrowers have previously taken a product transfer. As discussed in Remortgaging in 2026 After Using a Product Transfer First, product transfers can reset ERC clocks in ways borrowers do not always appreciate, extending penalty exposure beyond the original deal.
Buy-to-let borrowers are particularly exposed. Portfolio restructures, partial sales, or refinancing individual properties can all trigger ERCs that were not factored into the original strategy—an issue closely tied to challenges outlined in Why Remortgaging a Buy-to-Let Portfolio Is Harder Than Expected in 2026.
Understanding how ERCs are calculated is critical to assessing whether a remortgage makes sense.
Most ERCs are expressed as a percentage of the outstanding loan balance, not the original loan amount. In a high-value mortgage, even a modest percentage can equate to tens of thousands of pounds.
Some lenders also apply ERCs on a sliding scale that resets annually, rather than monthly. This means redeeming one day early can cost materially more than waiting several weeks.
In addition, lenders may calculate ERCs differently depending on whether the redemption is full or partial. Where borrowers are consolidating debt or releasing capital, this distinction becomes particularly important.
Critically, ERCs must always be weighed against the net benefit of remortgaging. As highlighted in Why Cash Buyers Are Still Using Mortgages in 2026, headline rates alone rarely tell the full cost story.
One of the most damaging ERC misconceptions in 2026 is the belief that waiting until the penalty period ends is always the cheapest option.
In reality, delaying a remortgage can expose borrowers to higher revert rates, missed fixed-rate windows, or tighter affordability criteria. This is particularly relevant where lender criteria are shifting.
In some cases, paying an ERC early and securing a longer-term fix can result in a lower overall cost than waiting and remortgaging later under less favourable conditions.
The key is not avoiding ERCs at all costs, but understanding when they are commercially rational—and when they are not.
Early repayment charges become even more problematic when household circumstances have changed.
Borrowers who are remortgaging due to income changes, relationship changes, or debt consolidation often face tighter timelines. Waiting for ERCs to expire may not be viable if affordability, credit profile, or lender appetite is deteriorating.
In these scenarios, ERCs become one variable in a broader strategic decision—not the sole determining factor.
A typical 2026 scenario involves a borrower approaching the final six months of a fixed rate. They assume ERCs are minimal and begin a remortgage application with a new lender.
Valuation delays, underwriting queries, and legal bottlenecks push completion back by several weeks. The borrower discovers that the ERC applies until the exact day the fixed rate ends, resulting in a five-figure penalty they did not budget for.
By contrast, had the strategy been structured earlier—either completing well before the penalty window tightened or aligning the remortgage to avoid timing slippage—the cost could have been mitigated or avoided entirely.
This is why ERC analysis must be done at the very beginning of any remortgage discussion.
Effective ERC management starts with clarity. Borrowers need to understand not just whether an ERC applies, but how, when, and on what balance it will be calculated.
From there, options can be modelled. These may include early completion with ERC factored into cost analysis, waiting strategically while securing an interim product transfer, or restructuring loans to minimise redemption exposure.
Loan segmentation can also help. In some cases, splitting borrowing across multiple parts reduces future ERC exposure and increases flexibility—an approach aligned with issues explored in Remortgaging in 2026 When Your Mortgage Is Split Across Multiple Parts.
The common thread is proactive planning rather than reactive decision-making.
Lenders show no sign of simplifying ERC structures. If anything, longer fixes and greater pricing differentiation suggest penalties will remain a core risk-management tool.
Borrowers who treat ERCs as an afterthought will continue to be caught out. Those who integrate ERC analysis into broader remortgaging strategy will retain flexibility and control.
In 2026, the cheapest mortgage on paper is often not the cheapest mortgage in practice.
Q1: Do ERCs always apply when remortgaging in 2026?
No, but many fixed and discounted products still carry ERCs until a specific end date.
Q2: Can ERCs apply even if my fixed rate is nearly finished?
Yes. ERCs often apply until the exact end date, and completion delays can trigger unexpected charges.
Q3: Are ERCs ever worth paying?
In some cases, yes. Paying an ERC can be cheaper overall if it secures a significantly better long-term rate.
Q4: Do product transfers reset ERCs?
Often they do, which can extend penalty exposure beyond the original mortgage term.
Q5: Can a broker help reduce ERC risk?
Yes. Proper timing, lender selection, and structuring are critical to managing ERC exposure effectively.
Willow Private Finance advises clients on remortgaging strategies where early repayment charges, complex loan structures, or timing constraints are involved.
We analyse ERC exposure alongside rates, affordability, and lender criteria—ensuring decisions are based on total cost, not assumptions. Our whole-of-market access allows us to structure remortgages that balance flexibility today with protection against unnecessary penalties tomorrow.
Book a free strategy call with one of our mortgage specialists.
We’ll help you find the smartest way forward—whatever rates do next.
About the Author
Wesley Ranger is the Director of Willow Private Finance and has over 20 years of experience advising clients on complex remortgaging and property finance strategies. He specialises in cases involving early repayment charges, high-value loans, and multi-part mortgage structures, helping UK and international clients avoid costly mistakes while securing long-term financial flexibility.
Important Notice
This article is for general information purposes only and does not constitute personal financial or mortgage advice. Early repayment charges, mortgage suitability, lender criteria, and product availability depend on individual circumstances and may change at any time.
You should always seek tailored advice before redeeming, restructuring, or remortgaging an existing mortgage.
Willow Private Finance Ltd is authorised and regulated by the Financial Conduct Authority (FCA No. 588422). Registered in England and Wales.
