AIB charging me a €950 break fee

Discussion in 'The Fair Mortgage Rates Campaign' started by Housefund123, 1 Nov 2017.

  1. Housefund123

    Housefund123 Registered User

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    Hi,

    I read this thread and the outcome with great hope, I rang AIB last week to ask about changing from our fixed 2year rate of 3.6 % and get it to 3.2%. We got our letter which stated that it would cost us over €950 to break this.

    We drew down in May, took 3 months off paying so we have just paid our second month mortgage.
    I'm kind of disappointed not to get the outcome above but fair play for getting them to move you!
    I might ring them again, see if they can do anything else.... It would mean having an extra €36 euro a month for us.

    Thanks for posting the update. I have my fingers crossed for us!
     
  2. Dauhee

    Dauhee Frequent Poster

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    Just move to EBS and pay the 950 break fee.
     
  3. RedOnion

    RedOnion Frequent Poster

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    Hi, do you have a very large mortgage balance? Interbank rates haven't moved a lot since May. AIB have a policy of using the nearest while year in calculating rates, so they'd compare the 2 year rate at drawdown to the 1 year rate now. But your mortgage balance must be close to 500k?
     
  4. Housefund123

    Housefund123 Registered User

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    Thanks for your reply. We borrowed 155,000 from AIB so it's a very manageable payment to make monthly.
    But we just wanted to see if we could avail of the lower rate after reading the other posters experience. And of course any savings we could make would be great.
    I actually rang AIB yesterday to see if there was any moving to the 3.2% rate but no chance. Just being sent out a letter again with the break out fee (which I assume will be the same fee of €950).
     
  5. RedOnion

    RedOnion Frequent Poster

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    Hi, they're calculating it wrong.

    Ask them to provide a break fee in accordance with the provisions of the Mortgage Credit Directive 2016, which is based on market rates, not the difference in their customer rates.

    If that doesn't work, lodge a formal complaint.

    I can post more info if you need it.
     
    Dauhee likes this.
  6. Housefund123

    Housefund123 Registered User

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    That's great, thank you. I'll wait for the letter to get here and if there's no change then I'll definitely be taking the advice above.
    We want to stay on the fixed rate, we just want to avail of the lower rate they announced in September.

    I'll update once I get the letter and let you know the outcome if I need to ring them again. I will do my research into the Directive so I don't feel like a fraud when I ring!
    Thanks for the advice so far.
     
  7. RedOnion

    RedOnion Frequent Poster

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  8. newirishman

    newirishman Frequent Poster

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    Let's have a quick look at that section 26:

    Point 2 states "compensation shall not exceed the financial loss of the creditor": doesn't refer to Interbank rates.
    Could it be argued that moving to a better rate is a financial loss insofar as you pay less interest? What is if the bank itself has fixed-term refinancing with break fees attached?

    I don't think that the bank cannot charge you a breakage fee at all. In any case, the breakage fee calculation should be outlined in your mortgage agreement (it usually is when you change to a fixed rate contract).

    EDIT: sorry, just saw that you aren't questioning the breakage fee in general, but just the amount. I agree, seems a bit high.
     
  9. RedOnion

    RedOnion Frequent Poster

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    Yes, that's exactly the piece they are entitled to 'fair and objective' compensation for, and the reason I referred to interbank rates as a close proxy.

    Every bank with the exception of AIB and Dilosk refer to market rates in their breakage fee terms.

    I don't believe AIB are compliant with legislation.
     
  10. newirishman

    newirishman Frequent Poster

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    Good question. The legislation doesn't state market rates, it states "financial loss". But nevertheless, I had a few fixed rate contracts (KBC and Ulsterbank) and they outlined rather detailed how the calculate the breakage fees.
     
  11. Housefund123

    Housefund123 Registered User

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    So we received our letter regarding the second phone call. This letter just explained the calculations and how they got to €950 as a break fee.
    After all these calculations were worked out and explained, the break fee quoted is now €909.

    Our second call wasn't really about clarifying the calculations of the break fee, it was more to see if we could get out of paying any break fee and move to the new fixed rate, like another poster did previously.
    But we don't seem to be having any luck with this right now so I'm going to read the link from RedOnion above and see if I have another angle to come from.
     
  12. Brendan Burgess

    Brendan Burgess Founder

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    Hi Housefund

    Any chance you could scan me a copy of the letter with the calculations. brendan at this website.

    It appears that they are doing it incorrectly as Red Onion has pointed out.

    Brendan
     
  13. Brendan Burgess

    Brendan Burgess Founder

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    Hi Housefund

    They are calculating the break fee incorrectly. They are not in compliance with the legislation as Red Onion has shown.

    I suggest that you break out and pay the break fee and then take it to the Obmdusman.

    They will resolve it and refund the fee long before it gets to an Ombudsman decision.

    Brendan
     
  14. Bronte

    Bronte Frequent Poster

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    That's a crazy story. How can banks get simple things wrong. Don't they have a computer system that calculates the figures correctly.

    Based on this thread it would appear many people ought to check what their break fees were. Including myself :eek:
     
  15. Housefund123

    Housefund123 Registered User

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    Thanks to all posters, especially Brendan and RedOnion.
    I will be doing up a letter of complaint to send to AIB, via registered post.

    I will update this once I get a response.
    Thanks.
     
  16. Brendan Burgess

    Brendan Burgess Founder

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    I have asked AIB about it and they insist that they are interpreting the legislation correctly. EBS and Haven are separate businesses and are free to interpret it differently.

    Brendan
     
  17. Housefund123

    Housefund123 Registered User

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    I sent off a registered letter in December, got a response today to say they had received my letter and that someone (gave the name of a person) would look into it and refer back us.
    So we'll see what happens, I'm not holding my breath but it was worth the letter to them anyway.
     
  18. Housefund123

    Housefund123 Registered User

    Posts:
    8
    We received another letter from AIB yesterday to say that they had investigated our claim and had found nothing wrong with their calculation. It was a final response letter so I can now proceed with sending the information onto the Ombudsman.

    I still don't think anything will come out of it but at least the issue will be raised at the next level.
     
  19. gobbomincer

    gobbomincer Registered User

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    I am in the same position as Housefund123, I have told them I am going to the Ombudsman if they don't change their position. I did raise it with AIB via my TD and got a load of waffle back including

    "The regulation makes no reference to the use of prevailing deposit rates as a point of reference for the calculation of fixed rate mortgage breakage costs"

    "AIB has been leading the market in the reduction of variable rates and as such we are not seeing high volumes of fixed rate breakage requests"
     
  20. gnf_ireland

    gnf_ireland Frequent Poster

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    @Housefund123 & @gobbomincer I would strongly recommend you take this to the FSO for resolution. AIB appear to be the only bank calculating it differently to everyone else and they should be held to account on this practice. You can also claim the loss in the rate from what you wanted to break until the fixed period expired.

    Its a straight forward enough complaint - backed up by regulation and standard practice, and therefore should be a relatively easy one to submit and get a judgement on, and its likely the bank may have to change their practice as a result

    Go for it !
     
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