Key Post AIB fixed rate customers face no early break fee currently

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RedOnion

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Analysis as at 12th September 2023.
This refers to AIB mortgages only, and not their subsidiaries EBS & Haven.

All lenders calculate break fees by comparing comparing the funding rate when you took out the mortgage with the funding rate when break out of the fixed rate. So when interest rates are rising, there should be no break fee. When interest rates are falling, there will usually be a break fee.

But AIB have an additional clause in their fixed term breakage fee which means that they also compare the fixed rate you are overpaying / breaking to the rates they currently charge for new business for the remaining term of your fixed rate. If the new business rate is higher than the rate you fixed at for the same period, there will be no break fee.

Any AIB customer breaking out today 12th September 2023, will not face a break fee, because they fall into one of the following categories:

- For customers on the Green 5 year rate, all shorter term rates are higher than your rate so a break fee cannot be charged
- For customers who fixed at any time prior to 30th June 2023, current new business rates are higher than your rate, so there is no break fee
- For all other customers who fixed since June 2023, there will be no break fee as AIB do not charge a break fee in the first year



The following rules will apply at a later date:

  • AIB will compare your rate to the complete year up & down from remaining term. So if you are a few months into a 4 year fix, they will compare to both 4 year and 3 year rate, and provide best outcome to customer. So if either the 3 year or 4 year rate is higher there will be no break fee.
  • For the first 12 months a break fee cannot be applied, as they compare your rate to the same rate
  • After 12 months, the maximum break fee is the difference between your rate and new business rates, by years remaining. So if on 4 year rate, after 12 months the 3 year rate is 0.05% lower. So the maximum break fee per 100k would be €150 (100,000*0.05%*3year); this is the maximum, as a funding rate comparison is also completed.
This situation will remain until such time as AIB reduce mortgage rates for new customers.

Additionally, from 14 October 2023, AIB are updating their T&Cs so that all fixed rate mortgage customers can make payments, over the normal regular scheduled payments, up to €5,000 each calendar year for the term of the fixed rate, without calculating if a break fee is due.
 
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Hi,
I received a letter from AIB "Overpayment allowance" with upto €5000 a year.
I am on 2.15% 5 year fixed Green rate. Would I pay break fee if I deposit €10,000?
 
@RedOnion

If one takes a new fixed mortgage out with AIB in October 2023 could they pay down €5000 in one go in November/December and repeat in feb/march of 2024 ?

Or should the €5000 be spread over the 12 months in a calendar year ?
 
@Pinoy adventure
You've missed the point. There is no break fee no matter how much you pay off.

But talking specifically to the 5k, when it becomes relevant, yes it's 5k per calendar year. One should pay off tgd money as soon as they have it for maximum interest savings.
 
Hi all,

I am with AIB green mortgage fixed at 2.15% (for 5 years) and would like to deposit a lumpsum.
Is the break fee still zero?
 
Pinoy adventure said:
@The Oggster even if fixed at a higher rate ??
4.65%
Click to expand...
No. The other poster said they had fixed at 2.15%.

AIB will allow €5,000 per year without penalty. After that a break fee may apply.

It would depend on how long you have left on your fixed rate and what rates are currently available for that (remaining) term. AIB use the market rate or the consumer rate they offer. They will pick the rate which is most favourible to you. If that rate is higher than 4.65% there should be no charge. If it's lower there might be a fee.

You could ask them to work out the fee before you pay but the rates might change again by the time you make your payment. The reason why I'm so confident in saying there's no fee for anyone who fixed at 2.15% is because there are no fees close to that available now.
 
I just realised that they reduced their fixed rates. I'm going to break out of our mortgage and refix at the new rate and reduce my rate by 0.2%. There will be no fee as I'm still covered by the terms outlined by RedOnion. I'm on the 5 year green rate at 3.65%.

From my calculations it would reduce payments by around €4 per fortnight (that's my frequency of payment).
 
The Oggster said:
I just realised that they reduced their fixed rates. I'm going to break out of our mortgage and refix at the new rate and reduce my rate by 0.2%. There will be no fee as I'm still covered by the terms outlined by RedOnion. I'm on the 5 year green rate at 3.65%.

From my calculations it would reduce payments by around €4 per fortnight (that's my frequency of payment).
Click to expand...
I am also on AIB green rate but at 2.15%.
 
As above I changed our rate from 3.65% to 3.45% without a fee and restarted the 5 year fixed term. The €5k overpayment allowance also restarted but I ignore that as I'm on the lowest rate available from AIB so overpayments don't have a fee anyway.
 
On green at 2.15% 2.5 years to go fixed.
We're in the lucky position to repay 20% towards end of year.
Do I need to get in touch with aib or just transfer in AIB app like we would have done for the tracker.
Trying to understand does break just mean you pay off a chunk, and by default the existing contract 2.15% continues on the remainder, or you break out into the market rate (assume it can't be the latter but do I need to communicate preference to AIB)
 
stovesoot said:
Do I need to get in touch with aib or just transfer in AIB app like we would have done for the tracker.
Click to expand...
You don't need to get in touch with AIB but you can for peace of mind because it is a large lump sum.

If you want to test it, transfer a few hundred euro to your mortgage account on the app. In about 2 weeks, you will get a letter confirming:
- your new monthly mortgage pay
- that no ERC applied

stovesoot said:
Trying to understand does break just mean you pay off a chunk, and by default the existing contract 2.15% continues on the remainder, or you break out into the market rate
Click to expand...
People use the term interchangeably but it is a bit misleading. Technically it is an early repayment charge (ERC). In your situation, you are making a early lump sum payment which may incur a charge. The ERC needs to be calculated but we know it will be zero because of AIB's t&cs.

'Breaking' typically refers to the ERC calculated on the full outstanding principal because you are switching to a new lender or a new rate. This does not apply to you as you only want to make a lump sum payment. You will remain on the same 5 year fixed rate that you have currently
 
RedOnion said:
Analysis as at 12th September 2023.
This refers to AIB mortgages only, and not their subsidiaries EBS & Haven.

All lenders calculate break fees by comparing comparing the funding rate when you took out the mortgage with the funding rate when break out of the fixed rate. So when interest rates are rising, there should be no break fee. When interest rates are falling, there will usually be a break fee.

But AIB have an additional clause in their fixed term breakage fee which means that they also compare the fixed rate you are overpaying / breaking to the rates they currently charge for new business for the remaining term of your fixed rate. If the new business rate is higher than the rate you fixed at for the same period, there will be no break fee.

Any AIB customer breaking out today 12th September 2023, will not face a break fee, because they fall into one of the following categories:

- For customers on the Green 5 year rate, all shorter term rates are higher than your rate so a break fee cannot be charged
- For customers who fixed at any time prior to 30th June 2023, current new business rates are higher than your rate, so there is no break fee
- For all other customers who fixed since June 2023, there will be no break fee as AIB do not charge a break fee in the first year



The following rules will apply at a later date:

  • AIB will compare your rate to the complete year up & down from remaining term. So if you are a few months into a 4 year fix, they will compare to both 4 year and 3 year rate, and provide best outcome to customer. So if either the 3 year or 4 year rate is higher there will be no break fee.
  • For the first 12 months a break fee cannot be applied, as they compare your rate to the same rate
  • After 12 months, the maximum break fee is the difference between your rate and new business rates, by years remaining. So if on 4 year rate, after 12 months the 3 year rate is 0.05% lower. So the maximum break fee per 100k would be €150 (100,000*0.05%*3year); this is the maximum, as a funding rate comparison is also completed.
This situation will remain until such time as AIB reduce mortgage rates for new customers.

Additionally, from 14 October 2023, AIB are updating their T&Cs so that all fixed rate mortgage customers can make payments, over the normal regular scheduled payments, up to €5,000 each calendar year for the term of the fixed rate, without calculating if a break fee is due.
Click to expand...
This analysis is excellent. One thing I was going to ask about is: "For the first 12 months a break fee cannot be applied, as they compare your rate to the same rate"

What happens here if say you are on a 5yr fixed and all rates drop 3 months into your fix, and you want to break and refix at the new lower 5yr fixed rate? Would that always be free?
 
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keensaver said:
This analysis is excellent. One thing I was going to ask about is: "For the first 12 months a break fee cannot be applied, as they compare your rate to the same rate"

What happens here if say you are on a 5yr fixed and all rates drop 3 months into your fix, and you want to break and refix at the new lower 5yr fixed rate? Would that always be free?
Click to expand...

Also, is one refixes every 11 months, can a break fee ever be applied?
 
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