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

Discussion in 'Mortgages and buying and selling homes' started by Brendan Burgess, 24 Jul 2017.

  1. 86Crate

    86Crate New Member

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    Thanks RedOnion. Really appreciate the assistance. I'll get in touch with them closer to new rates kicking in, but wanted to get an indication as to what it would look like, as the formula they provide isn't hugely straightforward!

    Where's the best source to get those rate percentages? (for the 0.13% drop)
     
  2. RedOnion

    RedOnion Frequent Poster

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    2,088
    To get accurate rates, you'd need access to Bloomberg or similar.
    Swap rates are a good proxy
    https://www.theice.com/marketdata/reports/180
     
    RMGC11 likes this.
  3. SPD123

    SPD123 New Member

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    2
    Last edited: 20 Jul 2018
    Lender: KBC
    Value of property: €525,000
    Mortgage balance outstanding: €380,000
    Date of fixing: March 2018
    Period fixed for: 3 years
    Fixed rate: 2.9%
    Term left: 2.5 years

    A few days ago I was quoted a breakage fee of €625 in relation to the above, which is valid for another week. I was wondering if this fee seems right. I have looked at interbank rates since I last fixed, and they seem to have risen. In March 2018 they were -0.329% and they are now -0.321%. If rates have increased, how is the quoted breakage fee reasonable?
     
    Last edited: 20 Jul 2018
  4. RedOnion

    RedOnion Frequent Poster

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    @SPD123
    The rates you are looking at are 3 Month rates.
    You need 3 year rates.
     
  5. SPD123

    SPD123 New Member

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    2
    Thanks RedOnion. I have just looked at the 3 year swap rates and they seem to have fallen by 0.075% in that period. So that breakage quote is probably right. KBC's new fixed rates do not come in to effect until 3rd September. Is it worth breaking now and going on the variable rate (3.05%) for a month before fixing again. Or should I take my chances and see what the breakage fee is in early September. I know future rates are impossible to predict with certainty, but what are the chances of the breakage fee being less in 6 weeks time?
     
  6. RedOnion

    RedOnion Frequent Poster

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    It's impossible to predict short terms moves in interest rates - you're talking about a drop of 0.01% increasing break fee by more than the cost of moving to variable rate for 6 weeks.

    Each 0.01% increase in rate reduces your break fee by 95 euro.

    If you want certainty, break now. Have your valuation ready to fix as soon as rates are available.
     
  7. Dubwoman

    Dubwoman New Member

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    3
    Hi Brendan

    Thanks for all the info in this thread. I rang AIB today and this is our situation

    Lender: Aib
    Rough value of property: €500k
    Total amount borrowed: €357
    Amount of mortgage balance outstanding: €317,000
    Date you fixed: feb 2015
    Period for which you fixed: 5 years
    Fixed rate: 3.9%
    Term left: 15 months
    Breakage fee quoted: waiting for figure as they said would take 5-7 days

    The LTV seems favourable too as would bring us into the 50-70% category the rate for that is 2.9%
    Would you recommend breaking and trying to do LtV now which property value is so high now waiting until February until the fixed rate is finished?

    Thanks
     
  8. RedOnion

    RedOnion Frequent Poster

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    @Dubwoman
    AIB will quote you a break fee of about 2,700.

    So long as you move to a rare below 3.2%, you will save money over the remaining 15 months.

    Did you fix on drawdown, or were you on a variable rate initially? If you were ever on an LTV rate, they might not let you change bands.

    Would you move to another lender and get a better rate?
     
  9. Sean Og

    Sean Og Frequent Poster

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    77
    Why not go for the triple switch cash back Bonanza on offer with EBS, PTSB and BOI. 2% of 317k is €6340 cash back a time less valuation fee and legals so at least €5000 profit.
     
  10. Dubwoman

    Dubwoman New Member

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    3
    I’d love to switch provider tbh but we are now down to one income because I am at home with small kids at moment. So I presumed we would not be accepted by a different lender as his income wouldn’t qualify for 317 if they make you apply again. Or maybe I am wrong on this ?

    I fixed on drawdown to a three year fixed rate between 2010-2013 and I think we may have stayed variable till 2015 when we locked into this five year rate which expires in February 2020. I definitely didn’t do LTV yet. Do you know if the breakout fee can be added to the mortgage balance rather than paid as a lump sum with aib