Bank of Ireland quoting me €2,700 break fee for a recently fixed mortgage

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bluebell11

Registered User
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I've been quoted a €2700 break fee o_O Got the mortgage in the summer - 5 year fixed at 3%.


Moderator's note: for anybody who is thinking of switching their mortgage (or re-fixing with their current lender), consider posting your mortgage details in the switcher thread (in the format shown in the first post). Someone will calculate an estimate of the break fee (if any) and of the savings you would make from switching (or from re-fixing).
 
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Well BOI called back and offered me the 2.8% rate. No movement on the €2700 break fee though so will call again over the next few days and see how much it fluctuates I guess.
 
Yeah I was quite surprised when I heard the figure - given how many on this site have been quoted 0 to a couple of hundred. Any idea why it’s so high? I’m going to call back over next few weeks and days and see if it fluctuates much.
 
bluebell11 said:
Yeah I was quite surprised when I heard the figure - given how many on this site have been quoted 0 to a couple of hundred. Any idea why it’s so high? I’m going to call back over next few weeks and days and see if it fluctuates much.
Click to expand...

These quotes vary so much because the banks' cost of funds at origination, remaining term, and balance outstanding, vary a lot in the examples cited.

The parameters the banks are using are the same.
 
I’m in a similar position. What I can’t understand is how the rate for breaking out of a 10 yr fixed rate went from 1500 in November to 5000 in December to 7000 in January
 
The following post explains how break fees are calculated. https://www.askaboutmoney.com/threads/understanding-fixed-rates-breakage-costs.204427/


brennan said:
I’m in a similar position. What I can’t understand is how the rate for breaking out of a 10 yr fixed rate went from 1500 in November to 5000 in December to 7000 in January
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1st November, 10 year rare was approx 0.98%
It's currently 0.78%
So break fee could change by about 2% of balance in that timeframe. The big drop in equity markets flooded the bond markets which has dropped yields over the past few months. Which in turn increases break fees.
 
brennan said:
I’m in a similar position. What I can’t understand is how the rate for breaking out of a 10 yr fixed rate went from 1500 in November to 5000 in December to 7000 in January
Click to expand...

Look at the parameters used by the bank.

Essentially the bank has to place the funds on deposit when you pay them back. The relevant rate they use is EURIBOR. If the rate goes down, then they earn less on what you pay back, so you have to pay more to break. If the rate goes up, they earn more, so the break fee is lower.

The banks are very untransparent about this and make it very hard for the customer to assess what the rate being used is at all, never mind whether they rate they are quoting is direct. Bank mortgage staff on the phone generally don't understand how this process works when you call them up. They will just give you a stock answer about how it changes day by day.
 
I don't want to rant, but....
Is this not the risk you take when you fix your mortgage rate? I can understand a small/no breakage fee if you are few years in to your term, but is it not a bit much to expect a zero fee if you are only a few months in?
 
I was 2.5 years into a 7 year fixed with UB @ 3.6%. Called them up in October to get the 'Breakage fee'. To my surprise it was zero. Swapped over to their 2.3% fixed for 2 years rate. Probably should have fixed for longer but the 2.3% was too attractive. I would have been willing to pay a few grand breakage fee as I would have saved in the long run. V happy with Ulster overall.
 
JohnJay said:
I don't want to rant, but....
Is this not the risk you take when you fix your mortgage rate? I can understand a small/no breakage fee if you are few years in to your term, but is it not a bit much to expect a zero fee if you are only a few months in?
Click to expand...

why do you understand a small or no breakage fee if you are a few years in, but say people should not expect a 0 fee if they break after a few months. In a relatively stable market its more likely to be 0 after a short period.

There is a defined formula.
 
I also have a Fixed rate mortgage with BOI. Switched in the summer @ 3% with Cashback and I called them in November to ask if they would put me on 2.8%. I was told the breakage fee changes each day and on that day it was 80 euros. I think also it doesn't matter what it is on that day you call or request forms to be sent out as by the time the forms are sent out, signed and returned the break fee will have changed. So what I did was added a cover note to my returned form to say "Do not switch to 2.8% if break fees are greater than 100 euros" I'm now on the new 2.8% ever since. But to be honest I dont think I was informed afterwards what the break fee if any actually was. I've checked my account and did not see anything debited related to Break fees.
 
random2011 - the lady I spoke with mentioned sending in a cover letter so I may do that also. I'm going to call up a few more times to see how the fee fluctuates
 
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