Key Post It may be much cheaper than you think to break out of a fixed rate early...

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RedOnion said:
Unfortunately it's difficult to get accurate information on interbank rates at the moment. There's a big spread between bid / offer rates, and the swap market has diverged from the rates available to banks to put money on deposit.
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Hi! Do you mean that the table from "the ICE report" ( https://www.theice.com/marketdata/reports/180 ) is no longer appropriate to get a rough idea of penalty fees? I'm on a 2y fixed with KBC, hit the 10% limit but continuing to make overpayments... If there's no good proxy to get an idea of the penalties though, it sounds like it might be safer to stop until the term ends in November?
 
@MrsBob
Yes, at the moment there's a very low volume of swap trades on some days, so it's difficult to gauge real interbank rates without paying for the information.

MrsBob said:
it sounds like it might be safer to stop until the term ends in November?
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I wouldn't stop if you've the funds available, and no better use for them. Even if there's a break fee, it will be less than the interest you'll save by repaying early.
 
On 2.9% variable with AIB and have the form on my desk to go 2.55% for 3 yrs.. conflicted as it may drop again soon due to Covid and don’t want to miss out..
 
RedOnion said:
I wouldn't stop if you've the funds available, and no better use for them. Even if there's a break fee, it will be less than the interest you'll save by repaying early.
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Thank you for the reply, @RedOnion. Your posts have informed many of my decisions on overpaying and breaking fixed terms over the last couple of years. Really appreciate the advice you share here.
 
Techhead said:
Yeah the interest rate...still mulling it over
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Nah, the market is dead, and will be for a while. Banks drop rates to win market share, but there won't be anything to win in the next 6 months. In my opinion, competition will ease off completely now until potentially the next phase of mass mortgage applications.
 
I'm 20 months into a 5-year term with KBC fixed at 2.6% and I've just been quoted a breakage fee of over €6,800.00 to get out of it! It was the best rate at the time but UB are now offering 2.2% (and indeed, KBC are offering similar rates). Is it worth checking back with them every few weeks to see if the breakage fee has come down? I'm surprised the fee is that high as from reading this forum I thought it would be much lower or even zero.
 
RedOnion said:
Nah, the market is dead, and will be for a while. Banks drop rates to win market share, but there won't be anything to win in the next 6 months. In my opinion, competition will ease off completely now until potentially the next phase of mass mortgage applications.
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@RedOnion
David McWilliams in the IT
The ECB will make finance available to the banks at minus 0.75 per cent. This means that any Irish bank can now borrow from the ECB and lend out that money at rates as low as 1 per cent and still make a profit. Think about what this can do to the mortgage market. A bank can now offer mortgages at 1 per cent. Such a bank could also offer to swap existing mortgages for this new mortgage at the 1 per cent rate.
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Could there be an incentive to pursue this in our new paradigm (are we in a new paradigm?!)? Or are they borrowing at -0.75 and lending at 3 anyway?!

Warning: Post may be off topic
 
Hi @Julian
Interbank rates have dropped during the current crisis, which means break fees go up. If markets settle a bit you'll see the rate going back down.
What balance have you got?
 
Itchy said:
@RedOnion
David McWilliams in the IT


Could there be an incentive to pursue this in our new paradigm (are we in a new paradigm?!)? Or are they borrowing at -0.75 and lending at 3 anyway?!

Warning: Post may be off topic
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McWilliams' ideas are populist nonsense, he was the one who came up with the idea for the bank guarantee scheme in 2008, which has cost us all dearly.
 
Many thanks @RedOnion, I'll get back to them in a few weeks so - are there any particular market indicators I should keep an eye on? Our balance is €325k with an LTV of around 40%.
 
Just to update, I haven't received a breakdown from Ulster Bank of any penalties for breaking our fixed rate early. We redeemed our mortgage by selling our house. But they refunded me an overpayment of the closing balance (an overpayment by the solicitor as there was a mortgage payment made in the interim between closing and redemption). To close the mortgage account, the full closing balance was all that was paid. they was no penalty, closing charges or fees of any type, which I was surprised by. I remember selling a house in the UK years ago when there was a £1k closing "fee" of some sort.
So in essence, it appears no penalty was applied!

To add, I didn't get any letter from UB confirming the mortgage account being closed, or detailing the charges to do so or anything. Now, maybe it went to the old house, but I have updated on address on file. Could be a bottleneck in the systems at the moment but if I don't hear over the next few weeks, I will request it as it would be good to know its closed off for certain.
 
RedOnion said:
Nah, the market is dead, and will be for a while. Banks drop rates to win market share, but there won't be anything to win in the next 6 months. In my opinion, competition will ease off completely now until potentially the next phase of mass mortgage applications.
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Hi.
I need some help regards my fixed mortgage.
My details are:
Fixed my 265k mortgage at 3.99% for 6 years until 31/07/2022 with Ulster Bank. We now owe 244k.
I asked what it would cost to break out of the fixed rate and I got a letter stating it would be €2400 to leave. Is this fee too much or should we even be paying anything at all? I know it would still be very worthwhile to leave but I would obviously prefer to leave with no breakage fee at all. Thanks
 
Nprice said:
Is this fee too much or should we even be paying anything at all?
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Hi,
Yes there would be a break fee. It would be calculated based on the difference between the 6 year rate when you fixed, and the 2 year rate now.

The fee looks correct, but I'd need to know exactly when you fixed to check the calculation because rates fell quickly in Q2 2016. UB don't fix for exactly 6 years so you could have fixed anytime between January & June 2016.

Just bear in mind that rates have been moving around a bit in the current crisis. If you delay, and rates settle back down again you could end up with a larger fee (if interbank rates drop, your break fee goes up).

Hope this helps.
 
RedOnion said:
Hi,
Yes there would be a break fee. It would be calculated based on the difference between the 6 year rate when you fixed, and the 2 year rate now.

The fee looks correct, but I'd need to know exactly when you fixed to check the calculation because rates fell quickly in Q2 2016. UB don't fix for exactly 6 years so you could have fixed anytime between January & June 2016.

Just bear in mind that rates have been moving around a bit in the current crisis. If you delay, and rates settle back down again you could end up with a larger fee (if interbank rates drop, your break fee goes up).

Hope this helps.
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We had a 7 year fixed rate initially up until from 2016 - 2023 and only two months ago Ulster Bank wrote to us to say we should have been put on a six year fixed rate and gave us the option to stay until 2023 or finish after 6 years (which we chose). Our original loan offer was as follows:
We did not draw down or start paying the mortgage until April 2016 as our house was still being built in a new estate. This info any use to you?
 
Nprice said:
We had a 7 year fixed rate initially up until from 2016 - 2023 and only two months ago Ulster Bank wrote to us to say we should have been put on a six year fixed rate and gave us the option to stay until 2023 or finish after 6 years (which we chose). Our original loan offer was as follows:
We did not draw down or start paying the mortgage until April 2016 as our house was still being built in a new estate. This info any use to you?
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Can't work out how to DM you, but just wanted to make sure you know that photo contains your address details and a lot of stuff that could be put together for identity fraud.
 
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