EBS Break Fee Question

Discussion in 'The Fair Mortgage Rates Campaign' started by Puddin, 31 May 2018.

  1. Puddin

    Puddin Registered User

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    6
    Hi All,

    First time poster here.

    I availed of the EBS 3% fixed rate for 5 years this week. I was previously on the 3.5% variable rate.
    My mortgage outstanding amount is €349K and i have about 18.5 years left.

    My EBS online shows a fixed rate break fee of €1,839.

    I thought it would be very low based on the lending rates being low but i wondered if someone would be able to check does this amount sound right.

    Thanks
     
  2. RedOnion

    RedOnion Frequent Poster

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    It equates to a 0.1% movement.
    There's a lot of volatility in the market with uncertainty around Italy so that kind of move in 5 year rate could have happened.
     
  3. jb81

    jb81 Registered User

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    11
    I signed up to the EBS 3.15% fixed rate for two years about 3/4 months ago..
    They released new fixed rates of 3% this month.

    I contacted them and was able to break my fixed rate for nothing and sign up to the 2 year 3% fixed rate.

    26 years left on Mortgage, balance at about 160,000.
     
  4. Puddin

    Puddin Registered User

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    6
    Thanks Guys
     
  5. Brendan Burgess

    Brendan Burgess Founder

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    36,007
    Hi Red

    So should people not fix for 5 years?

    Brendan
     
  6. RedOnion

    RedOnion Frequent Poster

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    You're talking about someone who fixed a week ago, and immediately looking at break fee. It'd change daily at the moment.

    Yes, there's a bit of volatility but 5 year rates aren't going to drop much. In this case a 0.1% drop over 5 years in 350k is less than 2k break fee.

    Unless someone is planning to break when they fix, I'd still recommend to fix for as long as possible at the rate offered. The 5 year rate represents better value than 1 year given where market rates are.

    Anything else, and you might as well just start derivatives trading cause you think you know better than the market.
     
  7. Puddin

    Puddin Registered User

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    6
    Just a quick update.My break fee is actually as of today €1,030. It takes till the 1st day of the month after fixing for correct changes to show up on EBS online.
    Am i correct in assuming this is the highest it will be and will decrease as i go further into the 5 years fixed term ?
    I am saving €90 a month by fixing so if after a year i had to break to pay off a lump sum or move bank i'd be in profit if my assumption is correct.
     
  8. skrooge

    skrooge Frequent Poster

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    161
    Afraid that's not how it works. Your assumption of a steadily decreasing break fee would only hold if the cost of banks funding (interbank rates) don't change.

    There are two moving parts to the break fee. First, the part you know, which is your outstanding mortgage, second, is the part you dont see, which is how the cost of funds have changed for your bank. You don't see how banks funding costs change and they change on a daily basis.

    It is the second part that will really influence your cost of breaking out of a fixed rate.

    Have a look at the following it will hopefully explain things in more detail and also has some worked examples:
    https://www.askaboutmoney.com/threads/understanding-fixed-rates-breakage-costs.204427/
     
  9. Puddin

    Puddin Registered User

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    6
    Hi All, another quick update...my first mortgage payment at new rate of 3% was paid today. My breakage fee is zero as of today. It went in the space of 1 week from €1,839 to €1,030 to €680 to €0. I don't know if this is of use but just so those who are thinking of fixing see that your breakage fee shown on your EBS online account will have differring values each day till 1st mortgage payment at new rate is made .
     
  10. RedOnion

    RedOnion Frequent Poster

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    5 year interbank rates increased by 0.1% since 1st June, wiping out your original break fee (i.e. rates are back to where they were when you fixed). It's nothing to do with making your first repayment.
     
  11. Puddin

    Puddin Registered User

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    6
    Ah ok so. Very happy i fixed either way. Thanks for that Redonion