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

barneyrubble

New Member
Messages
7
I got the breakage amount. €5510. Just wondering if anyone can figure out the formula that ulster bank use. Just want to see if they are just using the 6 month cap.
Any advice greatly appreciated.
Thanks in advance
Ongar, Just wondering what product you're looking at moving too.

We fixed in sept 2017 @ 3.99 and got breakage fee of 4k approx (waiting on the letter to come). Looking at our options now
 

ongar11

New Member
Messages
5
Ongar, Just wondering what product you're looking at moving too.

We fixed in sept 2017 @ 3.99 and got breakage fee of 4k approx (waiting on the letter to come). Looking at our options now
Barneyrubble, I'm looking at fixing for 2.6 over 5 yrs. LTV 79%. Letter very slow to come but rang UB and they gave me the figure over the phone. Letter arrived, was dated 23rd of Sep but only received it on the 30th stating the figure only lasts for 7 days. So i have requested another. They didn't state which method they used so also requested a calculation breakdown.
 

barneyrubble

New Member
Messages
7
Thanks Ongar. Our letter doesn't state calculation either


Lender: UB
Amount of mortgage balance outstanding: €193k
Date you fixed: Sept 2017
Period for which you fixed: 7 years
Fixed rate: 3.99
Term left: 5yrs
Breakage fee quoted: €3830

Got letter yesterday. Break fee of €3830 which is 6 months interest cap I gather?

Our options to change are 2.45% until dec 2021 or 2.75% to Dec 2023 or 2024.

Unsure what to do. We will be looking for a loan in the new year to do a small extension but this won't be mortgage top up. Repayments will be down by 131 or 161 by my calculations which would go towards loan repayment but then so would the 3830 breakage fee!!
Offer valid until 11th Oct
 

RedOnion

Frequent Poster
Messages
3,563
Anyone any advice for me?
Whichever you go with, the interest savings for next 5 years will cover your break fee several times over.

Personally, I think in 2 years time, the same rates will be available. Wholesale rate curves are flat, and competition will stop banks increasing margins. But it's crystal ball stuff. If you need certainty, go with the longer fixed rate.

I'd also suggest you get a top-up for the extension, but overpay mortgage as if it was a short term loan. Otherwise you're paying over 6% for it.
 

Fire away

Frequent Poster
Messages
53
Anybody put a ballpark guess to what my break fee would be?
Bank of Ireland 5 year fix taken out Sept 2018 so 4 years remaining. Fixed at 2.8% balance of 250k.
 

RedOnion

Frequent Poster
Messages
3,563
Anybody put a ballpark guess to what my break fee would be?
Bank of Ireland 5 year fix taken out Sept 2018 so 4 years remaining. Fixed at 2.8% balance of 250k.
About 7,500
I'm pretty sure BOI can tell you immediately when you call them to ask.
 

RedOnion

Frequent Poster
Messages
3,563
Thanks. Any idea why so high taught most break fees nearly zero now
Break fee is a factor of the movement in interbank rates and the remaining time of your fixed rate.

Interbank rates have pushed even further into negative territory since you fixed. There was a period when they were fairly stable between late 2016 & early 2019. So lots of people had near zero break fees.

When I started looking at this topic 2 years ago, short term rates were negative, and 5 year rates were about 0.3%. That was as low as they'd ever been, and after a long period of quantitative easing. It looked like we were at the very bottom of an interest rate cycle but it was uncertain how long the bottom would last.

There's been a lot of European and global factors since the start of 2019 that have pushed those rates even lower. 10 year Irish government debt dipped below 0% in August. This seemed impossible earlier in the year.
 

Okokokoknic

Registered User
Messages
7
Bit of an odd one here but I'll try and explain it.

Took out mortgage July 2018, fixed with BOI at 3.0% for one year.
Had intended on switching to UB in July 2019, but got held up with deeds issue - first registration of the title with Property Registration Authority.
(This was complicated further by a change of solicitor on our part handling the switch, who had to contact our old solicitor, who had to contact the original vendors solicitor etc).
As a result we sat on BOI variable from July 2019 to now, getting hit with 4.2%
I was just about to refix with BOI for 1 year when low and behold there finally seems to be movement with the deeds. I fear the switching process may take some time still to complete.
So my question is, if I refix with BOI today for 1 year at 2.9% (300K), and decide to break within 1 or 2 months, is there any way of guessing ahead of time what the max breakage fee could be? Or what would the breakage fee be if I decided to immediately break a few days after fixing? Or is purely crystal ball depending on the interbank rate at the time?
 

Jim_tpb

New Member
Messages
1
Lender:AIB
Rough value of property: 250,000
Amount of mortgage balance outstanding: 139,133
Date you fixed: 18/08/2010
Period for which you fixed: 10 yr
Fixed rate: 5.2%
Term left: 10 months
Breakage fee quoted: 2350.60

I should pay the breakage fee right? What's galling is that we asked for them to send the breakage fee calculations over 2 months ago and had to send a follow up before we got it
 

_ripped_off

Registered User
Messages
58
I’d definitely be complaining about the length of time to receive the breakage quote. Doesn’t surprise me with AIB though fiercely incompetent shower.
 

Alkers86

Registered User
Messages
82
My breakage free had been showing up around 8k for the last number of months but when I check today it's down below 2.5k. Might look at doing a switch
 

CaomhínB

New Member
Messages
6
Hi all,

I am Looking for information on breaking out of fixed rates. I fixed in Jan 2019 for 5years €173000 mortgage @2.6% with 14 years left. I contacted my bank and requested a breakout fee at beginning of October and was quoted €3500 over the phone. I requested the breakdown for this to see what rates were applied and I received nothing. I contacted the bank again in mid Oct and requested same, got nothing. I contacted bank again in November and again requested same, again got nothing (all by phone). I lodged a complaint with the bank at beginning Dec and today I received a letter saying they are given me €75 as full and final settlement of my complaint and if they do not hear from me within 5days, they will transfer this into my account. I still have not received the breakdown of the breakout fee or have not received any explanation as to why I have not got it or what measures have been put in place to prevent other customers having the same happen them in the future. If anyone can help I m wondering is what I was quoted correct? To date I still do not have the breakout fee which they say will be sent out in a few days. Is the above, out of line from the bank?......it’s not like a bank To hand over money either! I also find it odd that they give you 7/8 days from once breakout fee is quoted - but they don’t supply full breakdown figures. Any advice/help appreciated.
 

_ripped_off

Registered User
Messages
58
Wow this sounds very odd. Apart from the 7/8 days to pay the break fee from the quote. That’s standard because the fee quoted can change.
Get a letter out to them ASAP saying you do not accept the €75 as settlement of the complaint and outline your issues again.
Then I’d open a complaint with the ombudsman you can tell the bank in your letter your complaining to the ombudsman.
To note I opened my complaint with the ombudsman in June and only heard from them last week.
Someone else on here would be able to advise you on whether the breakage fee quoted is correct and if not what the correct figure is.
What rate are you looking to switch to 2.6 is quite low, or are you looking to do the cash back switches?
 

Paul F

Registered User
Messages
35
Hi all,

I am Looking for information on breaking out of fixed rates. I fixed in Jan 2019 for 5years €173000 mortgage @2.6% with 14 years left. I contacted my bank and requested a breakout fee at beginning of October and was quoted €3500 over the phone. I requested the breakdown for this to see what rates were applied and I received nothing.
That break fee looks broadly correct.

The formula for the break fee (at least the one used by Ulster Bank) is
A*(R-R1)*Y
where
  • Y is the number of years until the end of the fixed rate (approximately 4.25)
  • A is the outstanding mortgage balance as it will be around Nov 2021 (halfway between Oct 2019 and Jan 2024; approximately €143k)
  • R is the 5-year interbank rate available to the lender at the start of January 2019 (approximately 0.16%)
  • R1 is the 4-year interbank rate available to the lender at the start of October 2019 (approximately -0.415%). We use the 4-year rate because it's the one closest to Y.
Like other people here I use this site to estimate the interbank rates.

So your break fee is €143000 * (0.16/100 - (-0.415/100)) * 4.25 = €3,494 (approximately).

(Don't rely on any break fees I quote – they are only estimates.)

@CaomhínB Are you with KBC?
 

CaomhínB

New Member
Messages
6
Thanks Paul F and Ripped_off. Thanks for the replies and the figures regarding the break fee. I find it odd that the banks don’t clearly state what the interbank lending rates are and the breakdown of calculations. Yes I am with KBC. I was just thinking of changing to a 2year fixed rather than 5year. I think the 2 year fixed is 2.3% (at least it was that when I started looking)! I just found it strange/odd that the bank were offering money very quickly - but yet no explanation as to what breakdown of procedures occurred etc. I just don’t feel the bank would be offering money unless there is a big error/mistake by them?!
 

_ripped_off

Registered User
Messages
58
As far as I know they are obliged to provide you with a breakdown of how they calculated the figures in writing so you definitely have a case there. Do not accept the €75 or you won’t be able to take the complaint any further.
The interbank rate is constantly changing so they are not going to publish that information daily, however they should be able to provide you with their calculations and what interbank rate they are using for the calc.
 
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