Fixed Rate - told no penalty if I pay off loan

currently on a fixed rate mortgage.. was aware that I could pay off up to 10% without any breakage fee. I just rang the bank in question and the rep told me that due to the difference in the interest rates now, I would have NO PENALTY even for a higher amount, due to difference in interest rates..

Info from loan offer -
break fund cost = (original fixed rate) less (current fixed rate on offer for the term equating to remaining term)

Has anyone else heard of these? or paid off more than 10% off a fixed mortgage ?

Re: Fixed Rate - told no penalty if I pay off loan !!

It happens occasionally if the bank knows that they can lend your money back out to someone else at a higher rate than what you're paying.

Re: Fixed Rate - told no penalty if I pay off loan !!

Hi,
It may well do(in fact I got similar advise from BOI re car loan).
However: Get it clarified in writing!
Nicola

Re: Fixed Rate - told no penalty if I pay off loan !!

very simple. if you borrowed from the bank say two years ago for 5 years (3 years left) at 4.3% when interest rates were much lower. Now the 3 year interbank rate (which is the usual basis for calculating break costs in banks) is around 4.7%. So the rate the bank is receiving from you is 4.3%, but if they "broke" it for you, they could lend the money for 3 years at 4.7%+ credit margin. A profit to the bank. The terms of most if not all mortgages does not compel the bank to show you back this profit.

Thanks for all the feedback on this .. my understanding is I can pay up to 10% without any breakage fee and would still be on the same rate for the remainder of the fixed term..
I didn't ask the rep I spoke with what would happen to the rate if I paid over 10%.. whether I would pay out at the remainder of the 5 year fixed I'm on, or if I'm breaking out of that rate too.. that would be crucial in any decision for us.. I should probably check on that too. If I could pay over 10% and keep on the fixed rate for the remainder of the term, I would seriously consider that .. I was considering over payments for a year but might make more sense to pay the lump sum and channel any extra money into a regular savings a/c possibly.