Key Post Switch or re-fix my mortgage? Breakage fee calculator and savings estimates for your case (Ireland)

[Paul F]

Hi @Paul F , many thanks for your reply. I would have thought that the break fee should be in the hundreds, but the most recent estimate was €2,900! I did ask them for the figures they used and they gave 0.30% as the cost of funds and -0.36% as the cost of breakage. Do those numbers line up with what you have?

The cost of funds looks about right (see the 5-year swap rate in Nov 2018). But I can't see how the cost of breakage is -0.36% (see the 2-year swap rate for recent weeks/months).

The problem in all this is that KBC use a different rate in their calculation – possibly EURIBID – and we don't have access to that. But I wouldn't have thought that any rate of this type has stayed stable over the last three months, which is what is implied by your break fee quotes being virtually unchanged over the space a few months.

Do you remember if your recent break fee quotes have always drifted downwards? Or did they go up a bit sometimes?

@Sunny You have mentioned elsewhere that EURIBOR/EURIBID rates longer than 1 year aren't available publicly. If you have any experience of such rates, do you think it is possible for the two-year rate to have stayed stable over the last few months?

 

[mortgagebreaker]

The cost of funds looks about right (see the 5-year swap rate in Nov 2018). But I can't see how the cost of breakage is -0.36% (see the 2-year swap rate for recent weeks/months).

The problem in all this is that KBC use a different rate in their calculation – possibly EURIBID – and we don't have access to that. But I wouldn't have thought that any rate of this type has stayed stable over the last three months, which is what is implied by your break fee quotes being virtually unchanged over the space a few months.

Do you remember if your recent break fee quotes have always drifted downwards? Or did they go up a bit sometimes?

They have been drifting downwards, it was over 3,000 in January, maybe it was 3,300 or 3,500. Each month is has only gone down by a little bit, and it was always so high that I didn't take note because I was never going to break at that cost. But as the term and the capital has been reducing, it would be expected to drift down even if the rates where stable. I was just expecting to have reduced even more with the market interest rate changes recently

 

[Paul F]

They have been drifting downwards, it was over 3,000 in January, maybe it was 3,300 or 3,500. Each month is has only gone down by a little bit, and it was always so high that I didn't take note because I was never going to break at that cost. But as the term and the capital has been reducing, it would be expected to drift down even if the rates where stable. I was just expecting to have reduced even more with the market interest rate changes recently

It makes sense that the break fee would have been around €3,300 to €3,500 back in January, but it's hard to see how it hasn't fallen a lot since then, as you say.

I can think of two explanations:

• KBC used the correct cost of breakage in January but have forgotten to update it in subsequent calculations
• KBC uses a reference rate for their cost of breakage that has been bizarrely (almost) unchanged over the last three months

I don't know how to figure out which of these explanations is correct (or if there is another explanation). Any thoughts, anyone?

 

[mortgagebreaker]

I can think of two explanations:

• KBC used the correct cost of breakage in January but have forgotten to update it in subsequent calculations
• KBC uses a reference rate for their cost of breakage that has been bizarrely (almost) unchanged over the last three months

I don't know how to figure out which of these explanations is correct (or if there is another explanation). Any thoughts, anyone?

I wonder does my experience corroborate with others who have requested break fees from KBC's or if this is a unique experience. I urge anyone who has received a break-fee estimate from @Paul F to return with an actual quote from KBC.

 

[test123]

Interested to hear what the break fees would be, give that fixed rate is nearly up & what the options are for switching

• Current lender - Ulsterbank
• Outstanding mortgage balance (how much you still owe) = 204,039
• Approximate value of your property = 685,000
• The date you started your fixed-rate mortgage (month and year) = Sept 2017
• How many years you fixed for = 5 years
• Your current mortgage interest rate = 2.6%
• Your current monthly repayment (excluding any overpayments) = 1,374.41
• Your property's BER (Building Energy Rating) – estimated if necessary = B3
• Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when? None

Would appreciate any advice

 

[Paul F]

@test123 Does your fixed rate end at the end of September or at the end of December this year? (UB fixed rates typically last for "X and a bit" years.)

 

[test123]

Hi Paul, it's ending in Sept 2022, thanks

 

[StephM]

Also interested to hear your thoughts on our situation Paul:

• Current lender - PTSB
• Outstanding mortgage balance (how much you still owe) = 170922.48
• Approximate value of your property = 485,000
• The date you started your fixed-rate mortgage (month and year) = Dec 2019
• How many years you fixed for = 3 years
• Your current mortgage interest rate = 2.7%
• Your current monthly repayment (excluding any overpayments) = 1,424. 86
• Your property's BER (Building Energy Rating) – estimated if necessary = A3
• Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when? I get 2% cashback every month

Thanks in advance.

 

[Paul F]

• Current lender - Ulsterbank
• Outstanding mortgage balance (how much you still owe) = 204,039
• Approximate value of your property = 685,000
• The date you started your fixed-rate mortgage (month and year) = Sept 2017
• How many years you fixed for = 5 years
• Your current mortgage interest rate = 2.6%
• Your current monthly repayment (excluding any overpayments) = 1,374.41
• Your property's BER (Building Energy Rating) – estimated if necessary = B3
• Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when? None

Your break fee should be around €500 at the moment – but it is volatile because wholesale interest rates are volatile, so confirm it with Ulster Bank (and please post it here when you receive it, including the date of the letter).

Note: you will receive two separate letters from Ulster Bank a few days apart, and their structure and wording can lead to confusion. Look for the line that says: "To break out of this fixed rate early, you would have to pay a fee of €X". That amount is your break fee. Ignore all other references to break fees.

• Switching immediately to Haven's 4-year green fixed rate (2.0% with €2,000 cashback) will save you about €2,860 over the next 4 years
• Switching immediately to Avant Money's 7-year fixed rate (1.95% with no cashback) will save you about €1,180 over the next 4 years – but with the longer security of 7 years on a fixed rate
• Switching immediately to Avant Money's 10-year fixed rate (2.1% with no cashback) will save you about €80 over the next 4 years – but with the even-longer security of 10 years on a fixed rate
• Switching immediately to Ulster Bank's 5-year fixed rate (2.35% with no cashback) will leave you worse off by about €260 over the next 4 years. But it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).
  • Of course, if you decide to do this, you will probably want to switch again in 5 years when your fixed rate expires and your mortgage moves onto Permanent TSB's books, at which point you will be subject to their (probably higher) interest rates

These savings estimates use for comparison the scenario of switching to the 2.35% rate with Ulster Bank when the current fixed rate ends. And that's assuming that Ulster Bank (or Permanent TSB, if they have taken over your mortgage by then) are even offering a 2.35% rate in October 2022 – it could be higher (or lower). The estimates also account for fees and any cashback offered by the above lenders.

It may seem like it is not worth switching to another lender but bear in mind that your mortgage will soon be owned by Permanent TSB, whose rates are much higher than Ulster Bank's. So if you don't switch now, you might find that you really want to switch in a few years' time, at which point rates might be higher.

Note that the longer you fix for, the higher the break fee could potentially be in the future, which could be relevant if you want to move home. Of course, it's also possible for a future break fee to be small or zero. And at least some of Avant's fixed rates allow you to "take your mortgage with you" if you move home, which avoids any future break fee. It would be worth contacting them for clarification on which mortgages this applies to and on the terms and conditions.

 

[Paul F]

• Current lender - PTSB
• Outstanding mortgage balance (how much you still owe) = 170922.48
• Approximate value of your property = 485,000
• The date you started your fixed-rate mortgage (month and year) = Dec 2019
• How many years you fixed for = 3 years
• Your current mortgage interest rate = 2.7%
• Your current monthly repayment (excluding any overpayments) = 1,424. 86
• Your property's BER (Building Energy Rating) – estimated if necessary = A3
• Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when? [Yes – 2% cashback monthly]

Your break fee should be around €80 at the moment – but it is volatile because wholesale interest rates are volatile, so confirm it with Permanent TSB (and please post it here when you receive it, including the date of the letter).

• Switching immediately to Haven's 4-year green fixed rate (2.0% with €2,000 cashback) will save you about €4,700 over the next 4 years
• Switching immediately to Avant Money's 7-year fixed rate (1.95% with no cashback) will save you about €2,960 over the next 4 years – but with the longer security of 7 years on a fixed rate
• Switching immediately to Avant Money's 10-year fixed rate (2.1% with no cashback) will save you about €2,080 over the next 4 years – but with the even-longer security of 10 years on a fixed rate
• Switching immediately to Permanent TSB's 5-year fixed rate (3.0% with 2% monthly cashback) will leave you worse off by about €840 over the next 4 years. But it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).

These savings estimates use for comparison the scenario of switching to the 2.95% rate with Permanent TSB when the current fixed rate ends. And that's assuming that Permanent TSB are even offering a 2.95% rate in December 2022 – it could be higher (or lower). You would continue to get the Permanent TSB monthly cashback in such a scenario. The estimates also account for fees and any cashback offered by the above lenders.

Note that the longer you fix for, the higher the break fee could potentially be in the future, which could be relevant if you want to move home. Of course, it's also possible for a future break fee to be small or zero. And at least some of Avant's fixed rates allow you to "take your mortgage with you" if you move home, which avoids any future break fee. It would be worth contacting them for clarification on which mortgages this applies to and on the terms and conditions.

Are you currently getting 2% monthly cashback from PTSB?

Edit: Savings estimates adjusted to account for 2% monthly cashback.

 

[StephM]

Thanks a mil Paul, yes, I am getting the 2% monthly cashback from PTSB. Forgot about it when posting originally.

 

[Paul F]

Thanks a mil Paul, yes, I am getting the 2% monthly cashback from PTSB. Forgot about it when posting originally.

Grand, I've edited the savings estimates to account for that.

 

[OkeyDokey]

Your break fee should be around €560 at the moment – but it is volatile because wholesale interest rates are volatile, so confirm it with KBC (and please post it here when you receive it). In your case, it is extra volatile because there is so long left on your fixed rate.

• Switching immediately to Haven's 4-year green fixed rate (2.0% with €2,000 cashback) will save you about €9,180 over the next 4 years
• Switching immediately to Avant Money's 7-year fixed rate (1.95% with no cashback) will save you about €7,640 over the next 4 years – but with the longer security of 7 years on a fixed rate
• Switching immediately to Avant Money's 10-year fixed rate (2.1% with no cashback) will save you about €6,180 over the next 4 years – but with the even longer security of 10 years on a fixed rate
• Switching immediately to Avant Money's 15-year fixed rate (2.25% with no cashback) will save you about €4,740 over the next 4 years – but with the even longer security of 15 years on a fixed rate
• Switching immediately to KBC's 5-year fixed rate (2.4% with no cashback) will save you about €4,620 over the next 4 years. And it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).
  • Of course, if you decide to do this, you will probably want to switch again in 5 years when your fixed rate expires and your mortgage moves onto Bank of Ireland's books, at which point you will be subject to their (probably higher) interest rates

These savings estimates use for comparison the scenario of doing nothing. The estimates also account for fees and any cashback offered by the above lenders.

If you're feeling brave, you could consider the strategy outlined in this thread: switch to Haven's 2.35% 3-year fixed rate and get the €5k cashback. Then quickly switch to Haven's 2.0% green rate. If it works, you will be better off by about €12,180 in four years' time. Nobody knows for sure if Haven will allow you to do this, so you might be stuck on the 2.35% rate, but at least you'd have got the €5k cashback.

Note that the longer you fix for, the higher the break fee could potentially be in the future, which could be relevant if you want to move home. Of course, it's also possible for a future break fee to be small or zero. And at least some of Avant's fixed rates allow you to "take your mortgage with you" if you move home. It would be worth contacting them for clarification on the terms and conditions.

Many thanks Paul. KBC phoned me and quoted a break fee of 149 Euro. I haven't started the application process for Haven or Avantmoney. Would you advise paying the break fee now and switching to variable while applying for an alternative provider?

 

[Paul F]

Many thanks Paul. KBC phoned me and quoted a break fee of 149 Euro. I haven't started the application process for Haven or Avantmoney. Would you advise paying the break fee now and switching to variable while applying for an alternative provider?

As I mentioned before, your break fee is very volatile because there is so long left on your fixed rate – even a small move in interbank interest rates gets magnified because of the time left, which translates to large swings in the break fee.

If you want to "lock in" the low break fee, you could switch to KBC's 1-year fixed (2.5%), 2- or 3-year fixed (2.25%), or to their variable rate (3.0%).

Those fixed rates will save you some money (€100 or €150 a month) over the next few months (versus doing nothing). The shorter the period you fix for, the smaller any future break fee (when you finally leave KBC) will be, on average.

Breaking and switching to the variable rate guarantees no future break fee, but the rate could rise at any time.

Switching to another lender seems to take about 2 to 3 months these days, but it depends on which lender you switch to.

Nobody can tell you the "right" thing to do, but if you are going to break out of your current fixed rate and re-fix or go variable, do it quickly, while the quoted break fee is still valid.

 

[tobottherobot]

Your break fee should be zero at the moment – but it is volatile because wholesale interest rates are volatile, so confirm it with Bank of Ireland (and please post it here when you receive it, including the date of the letter).

• Switching immediately to Haven's 4-year green fixed rate (2.0% with €2,000 cashback) will save you about €11,160 over the next 4 years
• Switching immediately to Avant Money's 7-year fixed rate (2.05% with no cashback) will save you about €8,360 over the next 4 years – but with the longer security of 7 years on a fixed rate
• Switching immediately to Avant Money's 10-year fixed rate (2.2% with no cashback) will save you about €6,080 over the next 4 years – but with the even-longer security of 10 years on a fixed rate
• Switching immediately to Avant Money's 15-year fixed rate (2.4% with no cashback) will save you about €3,020 over the next 4 years – but with the even-longer security of 15 years on a fixed rate
• Switching immediately to Bank of Ireland's 5-year fixed rate (3.0% and you would get the 1% (€4,000) cashback in 2024) will leave you worse off by about €880 over the next 4 years. But it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).

These savings estimates use for comparison the scenario of switching to the 2.90% rate with Bank of Ireland when the current fixed rate ends. And that's assuming that Bank of Ireland are even offering a 2.90% rate in May 2024 – it could be higher (or lower). You would get the Bank of Ireland €4,000 future cashback in such a scenario, and the savings estimates account for this. The estimates also account for fees and any cashback offered by the above lenders.

Note that the longer you fix for, the higher the break fee could potentially be in the future, which could be relevant if you want to move home. Of course, it's also possible for a future break fee to be small or zero. And at least some of Avant's fixed rates allow you to "take your mortgage with you" if you move home, which avoids any future break fee. It would be worth contacting them for clarification on which mortgages this applies to and on the terms and conditions.

The estimates also assume that your loan-to-value ratio (LTV) really is below 70% so that you are eligible for the listed rates. Your LTV estimate is 393.0k/575.0k = 68.3%. If you get a valuation of less than €562k, you will need to make a few more monthly mortgage payments and/or a small overpayment to get the LTV below 70%. But that is not a reason to delay the switch – i.e., you can start the switch immediately.

If you're feeling brave, you could consider the strategy outlined in this thread: switch to Haven's 2.35% 3-year fixed rate and get the €5k cashback. Then quickly switch to Haven's 2.0% green rate. If it works, you will be better off by about €14,160 in four years' time. Nobody knows for sure if Haven will allow you to do this, so you might be stuck on the 2.35% rate, but at least you'd have got the €5k cashback.

€0 - you are correct. The rep in BOI also mentioned that it's volatile at the moment and the actual cost will be determined at the point money is transferred. FWIW to other readers, I called BOI about this in January and it was €1979. Fingers crossed it stays at €0!

 

[keensaver]

Your break fee should be zero at the moment – but it is volatile because wholesale interest rates are volatile, so confirm it with KBC (and please post it here when you receive it, including the date of the letter).

• Switching immediately to AIB's 5-year fixed rate (2.35% with €2,000 cashback) will save you about €580 over the next 4 years
• Switching immediately to Permanent TSB's 4-year fixed rate (2.05% with 2% monthly cashback) will save you about €540 over the next 4 years. (After 4 years, you will not be eligible to switch to any PTSB rate that is reserved for new customers only.)
• Switching immediately to Avant Money's 7-year fixed rate (1.95% with no cashback) will save you about €280 over the next 4 years – but with the longer security of 7 years on a fixed rate
• Switching immediately to KBC's 5-year fixed rate (2.4% with no cashback) will leave you worse off by about €190 over the next 4 years. But it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed). You will need to open a KBC current account, however. It seems that this is still possible to do.
  • Of course, if you decide to do this, you will probably want to switch again in 5 years when your fixed rate expires and your mortgage moves onto Bank of Ireland's books, at which point you will be subject to their (probably higher) interest rates
• Switching immediately to Avant Money's 10-year fixed rate (2.1% with no cashback) will leave you worse off by about €360 over the next 4 years – but with the even-longer security of 10 years on a fixed rate

These savings estimates use for comparison the scenario of switching to the 2.25% rate with KBC when the current fixed rate ends. And that's assuming that KBC (or Bank of Ireland, if they have taken over your mortgage by then) are even offering a 2.25% rate in April 2024 – it could be higher (or lower). The estimates also account for fees and any cashback offered by the above lenders.

It may seem like it is not worth switching to another lender but bear in mind that your mortgage will soon be owned by Bank of Ireland, whose rates are much higher than KBC's. So if you don't switch now, you might find that you really want to switch in a few years' time, at which point rates might be higher.

Note that the longer you fix for, the higher the break fee could potentially be in the future, which could be relevant if you want to move home. Of course, it's also possible for a future break fee to be small or zero. And at least some of Avant's fixed rates allow you to "take your mortgage with you" if you move home, which avoids any future break fee. It would be worth contacting them for clarification on which mortgages this applies to and on the terms and conditions.


Yes, the Avant cashback offer is finished. Why do you think they won't let you switch to them? If it's because a broker tells you that your balance is too low, find another broker.

As noted above, the 2.05% 4-year rate from PTSB is good over the next four years, but after that you won't be eligible to switch to their best rates – those are reserved for new customers only.

I assume that solicitors' fees are €1,300 all in and that the valuation fee is €150 or €185 (depending in the lender).

Edit: You are only eligible to switch to Permanent TSB if you have been with your current lender (KBC) for at least two years.

Thanks very much for this @Paul F, so useful!

Am I right in thinking with AIB 2.35% 5yr fixed; one would only pay a breakout fee if AIB's advertised rates for the fixed term left at the time of break (or nearest length to it) is lower than 2.35% AND if the interbank rate at the start of the switch is higher than the interbank rate when breaking out?

I thought Avant were fussy on location (near major city), select group of occupations only - which is why I didn't think they were an option.

The above is for a friend's situation who asked me for advice - I'll suggest the AIB 5yr approach and if they do pursue it I'll post the KBC breakout details here.

 

[test123]

Your break fee should be around €500 at the moment – but it is volatile because wholesale interest rates are volatile, so confirm it with Ulster Bank (and please post it here when you receive it, including the date of the letter).

Note: you will receive two separate letters from Ulster Bank a few days apart, and their structure and wording can lead to confusion. Look for the line that says: "To break out of this fixed rate early, you would have to pay a fee of €X". That amount is your break fee. Ignore all other references to break fees.

• Switching immediately to Haven's 4-year green fixed rate (2.0% with €2,000 cashback) will save you about €2,860 over the next 4 years
• Switching immediately to Avant Money's 7-year fixed rate (1.95% with no cashback) will save you about €1,180 over the next 4 years – but with the longer security of 7 years on a fixed rate
• Switching immediately to Avant Money's 10-year fixed rate (2.1% with no cashback) will save you about €80 over the next 4 years – but with the even-longer security of 10 years on a fixed rate
• Switching immediately to Ulster Bank's 5-year fixed rate (2.35% with no cashback) will leave you worse off by about €260 over the next 4 years. But it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).
  • Of course, if you decide to do this, you will probably want to switch again in 5 years when your fixed rate expires and your mortgage moves onto Permanent TSB's books, at which point you will be subject to their (probably higher) interest rates

These savings estimates use for comparison the scenario of switching to the 2.35% rate with Ulster Bank when the current fixed rate ends. And that's assuming that Ulster Bank (or Permanent TSB, if they have taken over your mortgage by then) are even offering a 2.35% rate in October 2022 – it could be higher (or lower). The estimates also account for fees and any cashback offered by the above lenders.

It may seem like it is not worth switching to another lender but bear in mind that your mortgage will soon be owned by Permanent TSB, whose rates are much higher than Ulster Bank's. So if you don't switch now, you might find that you really want to switch in a few years' time, at which point rates might be higher.

Note that the longer you fix for, the higher the break fee could potentially be in the future, which could be relevant if you want to move home. Of course, it's also possible for a future break fee to be small or zero. And at least some of Avant's fixed rates allow you to "take your mortgage with you" if you move home, which avoids any future break fee. It would be worth contacting them for clarification on which mortgages this applies to and on the terms and conditions.

Thanks for doing the calcs Paul. I need to confirm 100% that we have a ber of B3. Also do you know if Haven allow lump sum pay offs? We have been lodging 10-15k pa the past few yrs & hope to continue this, with the intention of being debt free in 2030.

 

[Paul F]

Thanks for doing the calcs Paul. I need to confirm 100% that we have a ber of B3. Also do you know if Haven allow lump sum pay offs? We have been lodging 10-15k pa the past few yrs & hope to continue this, with the intention of being debt free in 2030.

No, they don't. But you can ask them for the break fee at any time in the future and if it is sufficiently low for your tastes, you can make the overpayment and pay the break fee.

In such a case the break fee is calculated pro rata. E.g., if your mortgage balance is €200k and the break fee for paying off the entire mortgage is €1,500, and you make a €10k overpayment, then your break fee for the overpayment is 5% of €1,500, which is €75.

Ignoring that €75, you are getting a 2% annual return on your "investment" (the overpayment, assuming your mortgage interest rate is 2%). Not great, not terrible. Would it be better off going into your pension (where you get big tax reliefs)? But as always with overpayments, it's a tax-free, risk-free return.

 

[boconaill]

Hi Paul, could you please have a look at our situation? Thanks

Current lender = KBC
Outstanding mortgage balance (how much you still owe) = 240,456.86
Approximate value of your property = 475,000
The date you started your fixed-rate mortgage (month and year) = Nov 2018
How many years you fixed for = 5 years
Your current mortgage interest rate = 2.65%
Your current monthly repayment (excluding any overpayments) = 1,220.15
Your property's BER (Building Energy Rating) – estimated if necessary = A3
Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when? None

 

[Paul F]

Am I right in thinking with AIB 2.35% 5yr fixed; one would only pay a breakout fee if AIB's advertised rates for the fixed term left at the time of break (or nearest length to it) is lower than 2.35% AND if the interbank rate at the start of the switch is higher than the interbank rate when breaking out?

Yes, I believe that is correct. See the second post in this thread.

I thought Avant were fussy on location (near major city), select group of occupations only - which is why I didn't think they were an option.

Avant have been lending countrywide since December. Apparently in their initial press release in 2020 they said that borrowers would need to be in "stable employment with no obvious risk to future employment prospects". That's not a whole lot different to most lenders. And there was no mention of only lending to people in certain occupations.