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Fixed-rate business loans

Did you know that fixed-rate business loans often contain breakage clauses which can mean breakage costs of up to 50% of the loan? When customers try to exit the loan, either for refinancing or changing to a cheaper rate, or because they are forced to do so by their bank, they are faced with these often hidden costs.

The breakage cost is calculated by reference to the prevailing interest rate as well as predictions about interest rate movements at the time of termination. Detailed explanations should have been given of their effect and the potential risk of very large break costs in the event that interest rates dropped.

Most people’s previous experience with fixed-rate lending was from residential or buy-to-let mortgages where breakage costs are pre-defined at a few percent of the loan. They had no reason to believe that these business loans were any different. Most say they would never have signed up to them if they had known they were so dangerous.

If detailed explanations about breakage costs were not given, and you would not have taken the loan if you had been given them, you have a case for mis-selling.

Did you receive misleading advice about interest rates?

Many customers report that their lender recommended they changed from a variable-rate loan to a fixed-rate loan. Many say they were told that interest rates were going to rise and advised to take the product. Bank employees were not allowed to give interest rate advice on these sales.

Employees were incentivised to sell these products to you because they received enormous commissions which were paid to them in full straight after the sale. If you received interest rate advice it improves your case for mis-selling.