Extortionate Change in Break Fee

Jimbodean

Registered User
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We were originally told our break fee with KBC was €0 so we pressed ahead with a new mortgage application (which just so happened to still be with KBC) so that we could move house. When the conveyancing process was finalised and we finally moved into our new home, we were told by KBC that our new break fee was now in fact €16,777. From the initial quote of €0 to the time we drew down our new mortgage, I was in contact with KBC's mortgage department, and various other departments whilst they tried to sell me all types of insurance, no less that 35 times. Not once did anyone give me the heads up that I may want to check the break fees again. I filed a complaint but their response was due to global events the rates had gone up...well nobody told us! They've now started to take repayments out of my current account each month without my permission to pay back the €16,777, which is likely to push me into arrears on my new mortgage...which again...is with KBC. I'll file a complaint with the Ombudsman but not sure what else to do??
 
You sold a house. You had a KBC mortgage.

On the day you completed the sale, your solicitor should have had current, written redemption figures from KBC to be relied on.

Are you saying that on day, your solicitor was relying on earlier written figures from KBC? Or the redemption figures including the break fee?

The sale should not have closed unless there was some agreement with KBC as to how the shortfall was to be accounted for. You have an absolute obligation to be in funds, or have an agreement with KBC about the shortfall, to discharge the mortgage which attaches to the property. Your solicitor gave an undertaking on closing to discharge the mortgage.

If the solicitor was relying on written, current redemption figures from KBC, you have a real argument.

If they didn't, then both you and your solicitor have a real problem.

mf
 
I was given verbal redemption figures over the phone from KBC...the written figure never arrived until we had moved in to our new house as it took KBC so long to produce them. In the meantime, my solicitor paid off what what was outstanding on the mortgage, not accounting for the new break fee cost as we assumed it would be around the €0 mark as previously told.

Customers cant be quoted €0 one day and then almost €17,000 the next. Simply saying 'these figures may change' is not good enough, to the average member of the public, a big change on €0 is €100, not €17,000. It seems to us that banks are allowed to get away with extortion when it comes to break funding fees.
 
Customers cant be quoted €0 one day and then almost €17,000 the next. Simply saying 'these figures may change' is not good enough

They can be.

The break fee is really only valid on the day you get your quote.

But follow up on MF1's very valid point.

While it's ok for lenders to vary their break fee, it's not ok for them to tell you in retrospect what it was.

As you were selling your house, you should have broken out of your fixed rate as soon as you got the quote.

Brendan
 
I was given verbal redemption figures over the phone from KBC...the written figure never arrived until we had moved in to our new house as it took KBC so long to produce them. In the meantime, my solicitor paid off what what was outstanding on the mortgage, not accounting for the new break fee cost as we assumed it would be around the €0 mark as previously told.

A solicitor should never, ever, ever rely on verbal redemption figures.

Everything should have been put on hold until the written redemption figures were received.

Go back and talk to your solicitor- they now have a real problem because they undertook to KBC not to release the Deeds to anyone until they were in funds to discharge the mortgage.

mf
 
They've now started to take repayments out of my current account each month without my permission to pay back the €16,777,
- How did this come about
- Who decided how much monthly
- Did you get a letter (s)

This is all very odd. Don't see how the sale proceeded if KBC were not fully paid off, but apparently it did happen.
 
Go back and talk to your solicitor- they now have a real problem because they undertook to KBC not to release the Deeds to anyone until they were in funds to discharge the mortgage.
I don't get this either. Surely KBC would not release the deeds till they full amount was discharged and the new bank would not release the funds till they had the deeds ?
 
"I don't get this either. Surely KBC would not release the deeds till they full amount was discharged and the new bank would not release the funds till they had the deeds ? "

It's how a very usual conveyancing transaction works.

The banks release Deeds to vendors'solicitors to facilitate a sale, out of which sale proceeds, the outstanding mortgage is discharged. Very few clients have sufficient funds to discharge a mortgage before a sale completes.

So- the vendor's solicitor undertakes to the bank that they won't release the Deeds to anyone until they are in funds to discharge the outstanding mortgage.

The vendor's solicitor must obtain written redemption figures from the Bank to facilitate a closing. Plus the vendor has contracted with their purchaser that they will pass on an unencumbered title. We deal with this with a clause in the Contract and a solicitor's undertaking to redeem the vendor's mortgage from the sale proceeds.

The purchaser's solicitor undertakes to their client's bank that they will register a first legal charge on the property. So there are a lot of undertakings going on.

Going back to the OP- what strikes me is that, as their new mortgage was also with KBC, the figures for that must have been crunched by KBC- including the discharge of the first mortgage.

All very muddy indeed

mf
 
- How did this come about
- Who decided how much monthly
- Did you get a letter (s)

This is all very odd. Don't see how the sale proceeded if KBC were not fully paid off, but apparently it did happen.
I never switched banks, my old mortgage was with KBC too. They said because I had previously signed a direct debit instruction when I first took out the original mortgage I didn't need to sign a new one. KBC decided the the monthly amounts based on the break fee and I was only told about it in the final response to my complaint. I had repayments taken out in Sep and Oct but each time I phoned KBC nobody could say what the direct debits were for.
 
It's how a very usual conveyancing transaction works.

The banks release Deeds to vendors'solicitors to facilitate a sale, out of which sale proceeds, the outstanding mortgage is discharged. Very few clients have sufficient funds to discharge a mortgage before a sale completes.

So- the vendor's solicitor undertakes to the bank that they won't release the Deeds to anyone until they are in funds to discharge the outstanding mortgage.

The vendor's solicitor must obtain written redemption figures from the Bank to facilitate a closing. Plus the vendor has contracted with their purchaser that they will pass on an unencumbered title. We deal with this with a clause in the Contract and a solicitor's undertaking to redeem the vendor's mortgage from the sale proceeds.

The purchaser's solicitor undertakes to their client's bank that they will register a first legal charge on the property. So there are a lot of undertakings going on.
Thanks for the info.

OK so it sounds like a top-up or re-mortgage ?
 
No - I think the OP was selling and buying- discharging a KBC mortgage and then taking out a new KBC mortgage- which is why it sounds so strange.

mf
 
Surely the break fee must be calculated according to a legally prescribed formula, the bank cannot just arbitrarily decide on a fee. Michael Fingleton is long retired.

Can you not ask KBC to demonstrate how the break fee was calculated. Does the mortgage redemption figure include anything else.

EIther it was correctly calculated or not. If the €16,777 was correctly calculated then what was the basis of your being quoted €0. If that was verbal, can you request a copy or transcript of the phone call. If you were verbally quoted €0 I think you would have a strong case to ask for a detailed explanation of how this changed. If that was their mistake which you acted upon in good faith I think you have a strong basis for a complaint.
 
This seems very high.

Suppose you were breaking a 10-year fixed rate for a large mortgage of 400k.

This is technical but the deposit rate available to KBC would have had to have fallen by at least 0.4% over the time between quote and drawdown which you suggested was two months. I don't have access to market data but wasn't aware of such big declines recently.

It would be useful if you could post the figures involved.

Demand worked examples from KBC. Post them here and there are posters who will help you figure out if they have been correctly done.
 
I broke out of a 10yr fixed.

I have the €0 fee in writing from KBC...there are no calculations on the letter, just the balance of the mortgage at €141,000 and a break fee of €0.

The next letter I received had an outstanding balance of €139,000 left on the mortgage and a break fee of €16,777.

Apparently these are the formulas KBC use; https://www.kbc.ie/interest-rates

There's no way I could ever have anticipated such a large increase. Banks need to do more to make break fees more transparent to their customers, it's too much of a grey area.
 
Hi Jim

On what date did you get the zero quote?
On what date did you redeem your mortgage?

While the solicitor should have got that information on the date you redeemed your mortgage, it would already have been too late for you. You had sold your house at that stage. So the solicitor is not the cause of your losses.

Brendan
 
That seems incredibly large for the sum in question.

Find out the wholesale rate used by KBC for each of the two quotes. You are entitled to this and indeed the worked-out formula in both cases.

Demand this in writing.
 
Hi Jim

On what date did you get the zero quote?
On what date did you redeem your mortgage?

While the solicitor should have got that information on the date you redeemed your mortgage, it would already have been too late for you. You had sold your house at that stage. So the solicitor is not the cause of your losses.

Brendan

Brendan,

There was about 8 months between the two quotes which was the time it took for us to find a new property to buy and for the conveyancing process to take place as we were in a large chain. I know this seems very naive of me now not to have obtained a more recent quote but I had never heard of 'wholesale rates' until a month ago. As far as we were concerned, banks were lowering their mortgage rates during that time and the ECB rate hadn't changed so if there was going to be a change in the break fee then it would have been minimal.

If KBC had originally quoted me €16,777, I wouldn't have questioned it and we probably would have delayed our move, it was how they quoted us €0 which led us down the wrong path. Also, like I've said...during that time, we spoke to representatives from KBC dozens of times and not once did anybody suggest that we may wish to review our break fee as the 'wholesale rate' had increased so much.

We were never provided with the wholesale rate for each of the two quotes??

I'm lodging a complaint with the FSO so we'll see how we get on. I'm not getting my hopes up.

Thanks for the advice everyone!
 
You can't go to the FSPO until you've exhausted the process (including appeals) with KBC itself.

The break fee seems somewhat more plausible due to the longer time period between initial quote and drawdown.
 
Hi Jim

There is another solution.

Some lenders allow you to move your fixed rate mortgage to the new property.

I think you should investigate this. Ask them to reissue the fixed rate mortgage at the original rate and term and amount and rescind the fee.

I think that would be a fair solution.

The 8 months gap is huge and would explain why the fee has risen so much.

Brendan
 
Hi Jim

There is another solution.

Some lenders allow you to move your fixed rate mortgage to the new property.

I think you should investigate this. Ask them to reissue the fixed rate mortgage at the original rate and term and amount and rescind the fee.

I think that would be a fair solution.

The 8 months gap is huge and would explain why the fee has risen so much.

Brendan

You can't go to the FSPO until you've exhausted the process (including appeals) with KBC itself.

I've exhausted the process...KBC have told me to go to the FSPO.

Brendan...I'll try that solution and see where it gets me?

I know the 8 months is huge...but a simple courtesy call from the 'mortgage lender of the year' to an existing customer who isn't switching banks could have avoided all this stress.
 
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