Key Post Break fee for some borrowers was wrongly calculated by KBC

M

mortgagebreaker

New Member
Messages
15
Moderator's note: I have copied some posts on the KBC break fees from other threads, to keep them all in one place - Brendan

I'd love to know what my break fee should be. I have called KBC in Jan, Feb, March and again today and it was virtually unchanged each time. I was hoping it would be near zero based what I have been reading here and elsewhere about the increase in market interest rates since Jan.

  • Current lender KBC
  • Outstanding mortgage balance (how much you still owe) 280,000
  • Approximate value of your property 360,000
  • The date you started your fixed-rate mortgage (month and year) November 2018
  • How many years you fixed for 5 years
  • Your current mortgage interest rate 2.6%
  • Your current monthly repayment (excluding any overpayments) 1280
  • Your property's BER (Building Energy Rating) – estimated if necessary D3
  • Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when? No.
 
Last edited by a moderator:
mortgagebreaker said:
I'd love to know what my break fee should be. I have called KBC in Jan, Feb, March and again today and it was virtually unchanged each time. I was hoping it would be near zero based what I have been reading here and elsewhere about the increase in market interest rates since Jan.
Click to expand...
I cannot see how your break fee has been virtually unchanged over recent months given that wholesale interest rates have been increasing so much. Ask KBC for another break fee quote and please ask them to show their calculations (including "cost of funds" and "cost of breakage") when providing the quote.

mortgagebreaker said:
  • Current lender KBC
  • Outstanding mortgage balance (how much you still owe) 280,000
  • Approximate value of your property 360,000
  • The date you started your fixed-rate mortgage (month and year) November 2018
  • How many years you fixed for 5 years
  • Your current mortgage interest rate 2.6%
  • Your current monthly repayment (excluding any overpayments) 1280
  • Your property's BER (Building Energy Rating) – estimated if necessary D3
  • Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when? No.
Click to expand...
My estimate of your current break fee is €520 at the moment but take that with a pinch of salt. (Can you give the dates and amounts of your recent break fee quotes?)
 
Last edited by a moderator:
Paul F said:
I cannot see how your break fee has been virtually unchanged over recent months given that wholesale interest rates have been increasing so much. Ask KBC for another break fee quote and please ask them to show their calculations (including "cost of funds" and "cost of breakage") when providing the quote.


My estimate of your current break fee is €520 at the moment but take that with a pinch of salt. (Can you give the dates and amounts of your recent break fee quotes?)
Click to expand...

Hi @Paul F , many thanks for your reply. I would have thought that the break fee should be in the hundreds, but the most recent estimate was €2,900! I did ask them for the figures they used and they gave 0.30% as the cost of funds and -0.36% as the cost of breakage. Do those numbers line up with what you have?
 
Paul F said:
The cost of funds looks about right (see the 5-year swap rate in Nov 2018). But I can't see how the cost of breakage is -0.36% (see the 2-year swap rate for recent weeks/months).

The problem in all this is that KBC use a different rate in their calculation – possibly EURIBID – and we don't have access to that. But I wouldn't have thought that any rate of this type has stayed stable over the last three months, which is what is implied by your break fee quotes being virtually unchanged over the space a few months.

Do you remember if your recent break fee quotes have always drifted downwards? Or did they go up a bit sometimes?
Click to expand...
They have been drifting downwards, it was over 3,000 in January, maybe it was 3,300 or 3,500. Each month is has only gone down by a little bit, and it was always so high that I didn't take note because I was never going to break at that cost. But as the term and the capital has been reducing, it would be expected to drift down even if the rates where stable. I was just expecting to have reduced even more with the market interest rate changes recently
 
mortgagebreaker said:
They have been drifting downwards, it was over 3,000 in January, maybe it was 3,300 or 3,500. Each month is has only gone down by a little bit, and it was always so high that I didn't take note because I was never going to break at that cost. But as the term and the capital has been reducing, it would be expected to drift down even if the rates where stable. I was just expecting to have reduced even more with the market interest rate changes recently
Click to expand...
It makes sense that the break fee would have been around €3,300 to €3,500 back in January, but it's hard to see how it hasn't fallen a lot since then, as you say.

I can think of two explanations:
  • KBC used the correct cost of breakage in January but have forgotten to update it in subsequent calculations
  • KBC uses a reference rate for their cost of breakage that has been bizarrely (almost) unchanged over the last three months
I don't know how to figure out which of these explanations is correct (or if there is another explanation). Any thoughts, anyone?
 
Paul F said:
I can think of two explanations:
  • KBC used the correct cost of breakage in January but have forgotten to update it in subsequent calculations
  • KBC uses a reference rate for their cost of breakage that has been bizarrely (almost) unchanged over the last three months
I don't know how to figure out which of these explanations is correct (or if there is another explanation). Any thoughts, anyone?
Click to expand...

I wonder does my experience corroborate with others who have requested break fees from KBC's or if this is a unique experience. I urge anyone who has received a break-fee estimate from @Paul F to return with an actual quote from KBC.
 
Thanks very much Paul for the info. Haven's deal looks excellent, good savings to be made there. I didn't realise we'd be paying a breakage fee if moving home. We are planning to move house in the next year so Avant is probably a winner then.

Back to KBC, I've asked for breakage fees and I am not getting anywhere near your figure. Looks like I'm in the same boat as mortgagebreaker has detailed in previous posts.

Breakage fees this year:

DateFee
26-JAN-223,012
14-MAR-222,901
12-APR-222,840

Roughly dropping by 50-60 a month. I requested these on the phone. I thought when I received the quote in January I was being bluffed on the phone so requested a letter confirming the fee. Unfortunately, the letter was a similar fee (3,000).
I have requested other breakage fees last year, but I didn't take note of or action on them as they were very high. It's disappointing that the fees are so high especially with KBC leaving the market. The fee has steadily and slowly reduced over time but is nowhere near low enough to leave for another provider.

On the last call I made to KBC, they told me to ring at the start of the month for a breakage fee. He believed the fees are cheaper at the start of the month. I'll try that in May.
 
boconaill said:
On the last call I made to KBC, they told me to ring at the start of the month for a breakage fee. He believed the fees are cheaper at the start of the month. I'll try that in May.
Click to expand...

Unbelievable. I don't understand that. It seems as though my break fee has been going down only because the number of months remaining in the fixed term is decreasing. I am not sure if I have seen any impact of volatile market rates in any of the break fee quotes that I have gotten from KBC.
 
mortgagebreaker said:
It seems as though my break fee has been going down only because the number of months remaining in the fixed term is decreasing. I am not sure if I have seen any impact of volatile market rates in any of the break fee quotes that I have gotten from KBC.
Click to expand...
I resurrected this old thread because I'm trying to figure out if KBC could have hedged their lending/borrowing rates in some way, and if so their "cost of breakage" would only change every time they hedge.

Can anyone shed any light on this idea?
 
Paul F said:
Other people here seem to get the break fee over the phone without too much difficulty. @mortgagebreaker, @boconaill Any advice?
Click to expand...
They have always been able give it over the phone, including any of the finer details such as the figures used in the calculations. AFAIK that is the only way to do it and it's the same process as getting it posted out - you have to call and be put through to the mortgage team in both cases.
 
Paul F said:
Great!

It is important that anybody who received a break fee quote from KBC in the last few months (that they are not happy with) request an updated one.
Click to expand...

Thanks @mortagagebreaker and @Paul F. That is great news. I'm waiting on the letter (redemption fee) requested on Tues. Also, I rang today requesting a breakage fee over the phone and the fee is still very high. I assume the redemption fee won't differ by much.
 
@mortgagebreaker and @boconaill Can you each share the KBC phone number and department you called to get your break fee quote? As I understand it, mortgagebreaker was given theirs immediately over the phone (I could be wrong), whereas boconaill had to wait. Why the difference?

You both fixed at approximately the same time (November 2018) for 5 years. It will be very weird if boconaill is quoted a high break fee while mortgagebreaker's is zero.
 
Paul F said:
@mortgagebreaker and @boconaill Can you each share the KBC phone number and department you called to get your break fee quote? As I understand it, mortgagebreaker was given theirs immediately over the phone (I could be wrong), whereas boconaill had to wait. Why the difference?

You both fixed at approximately the same time (November 2018) for 5 years. It will be very weird if boconaill is quoted a high break fee while mortgagebreaker's is zero.
Click to expand...
My assumption is that they post out redemption fee/amount and a breakage fee can be provided over the phone. On Tues I requested a redemption fee hence they posted it. Today I asked for the breakage fee from Tuesday's request, she said it wasn't allowed over the phone. I asked her to calculate the breakage fee as of today then I got a fee of 2,786.82.
Purely out of interest, last week (29th April) I requested a redemption fee and the breakage fee was 2,786.82 also. No change in a week.

I ring 01 664 6100 then dial 5 to get through the mortgage dept.

I asked today about how they calculate the fee and she directed me to the KBC website.
 
mortgagebreaker said:
@Paul F I have just been quoted €0 over the phone. In mid April it was €2,900!
Click to expand...

mortgagebreaker - Did you ask for it in writing as well?

I wonder could you give instructions over the phone to break the fixed rate contract there and then?

Just in case it is back to €2,900 when you get it in writing, make sure you have the name and time of the call so that if you have to challenge it later, they can find the call on their call recording system.

If you are definitely switching to another lender or refixing, you should break out of the fixed rate immediately.

Brendan
 
boconaill said:
I asked her to calculate the breakage fee as of today then I got a fee of 2,786.82.
Purely out of interest, last week (29th April) I requested a redemption fee and the breakage fee was 2,786.82 also. No change in a week.
Click to expand...
I deduce from this that KBC did not update the M ("cost of breakage") in their break fee formula between last week and today. (They didn't update the A or the T either, but that is understandable.)

That strongly suggests that they only update the cost of breakage periodically, either by mistake or because they hedge periodically.
 
You must log in or register to reply here.
Back
Top