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

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LonseaLM said:
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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Oh okay... can't see it myself. Thanks for letting me know
 
Leo said:
I've removed the photo, the image metadata included coordinates where the picture was taken, the image itself your account number.
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If I take a screenshot of a photo without my location on my phone... can I upload it to this site to get some advice about a breakage fee for a fixed mortgage. Will it still have details of my whereabouts on it? Not too savvy when it comes to technology!
 
Nprice said:
If I take a screenshot of a photo without my location on my phone... can I upload it to this site to get some advice about a breakage fee for a fixed mortgage. Will it still have details of my whereabouts on it? Not too savvy when it comes to technology!
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You can turn off location setting on your camera so they are not recorded on pictures. Then in the image itself, ensure there are no personal details including account numbers on show. Edit the image on your phone to obscure any such details, or simple cover with small pieces of paper before you take the picture.
 
There are a few addons to XenForo that will automatically remove EXIF from all attachments which might be an idea to install.
 
Hi there, we recently requested a breakage fee from AIB - we’re in year 3 of 5yr fixed 3.3%. Breakage fee is €400. However our latest quarterly interest is up instead of down. It’s usually down €20 or so each quarter but this quarter it’s up €15 - so a discrepancy of about €35. We queried it and were told it’s because of the leap year and the extra days in the quarter. Surely that shouldn’t be worth €35?!!
 
Hi. Thanks for the really useful thread. I was thinking about maybe trading up to a 4 bed. My first port of call was KBC to see if we could get a bigger mortgage. We’ve been in the house 6 years and fixed for 10 years at 2.95% about 2.5 years ago. Still owe roughly 252k and house is probably worth 500k ( but who knows really?). I knew there would be penalties for breaking the fixed term, but figured they would waive that if we wanted to take out a bigger loan with them.

I’ve been quoted.... €22,000

if they insist on this, I just can’t/won’t move. Before I go down there and argue... do I have a leg to stand on?

thanks
 
@Godders
When you fixed, 10 year interbank rates were c. 0.98%. the 7 year interbank rate is currently negative by about 0.2%

Taking your details 22k / 7 years / 252k suggests the break fee you've been quoted looks right.

Despite the interbank rates dropping so much, KBC are still charging the same rates now for new business.
I'd be making the argument to them that you'd like to have the break fee waived and stay on the fixed rate for the remaining 7.5 years for that portion of the new balance ( i.e. there's no 'cost' to the bank). But I'm not sure how far you'll get with it.

Otherwise wait til the markets settle and interbank rates increase a bit. Each 0.1% increase in rates will see your break fee drop by about 1,500
 
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RedOnion said:
@Godders
When you fixed, 10 year interbank rates were c. 0.98%. the 7 year interbank rate is currently negative by about 0.2%

Taking your details 22k / 7 years / 252k suggests the break fee you've been quoted looks right.

Despite the interbank rates dropping so much, KBC are still charging the same rates now for new business.
I'd be making the argument to them that you'd like to have the break fee waived and stay on the fixed rate for the remaining 7.5 years for that portion of the new balance ( i.e. there's no 'cost' to the bank). But I'm not sure how far you'll get with it.

Otherwise wait til the markets settle and interbank rates increase a bit. Each 0.1% increase in rates will see your break fee drop by about 1,500
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Thanks @RedOnion
That’s really helpful.
We’re at that stage where the house is too small for the 4 adult sized people but we can’t decide if we should extend, convert the attic, or just move. At the moment, a bigger gaff in the same area would be valued at about 25% more than what we have. A big fee just to take on mor debt is not an attractive prospect.
I will ask about your suggestion.
they can only say no - in which case - we’re staying put
Thanks again
 
Hello
I'm new to askaboutmoney, i see this thread is quite old but it's on the exact topic I'd like to ask about.
I have a mortgage with bank of ireland (two years into a ten year fixed rate), and i recently asked for a breakout fee, hoping to take a cheaper 2-year or 5-year rate.
The breakout fee i was quoted is €34,265.00

This seems extremely high compared to other's experience of this. I understand how it is calculated, and that the EURBID is very low at present, and also the term is much longer, but the breakout fee offered is shocking to me. Why is boi's breakout fee so high when other banks currently offer a breakout fee of zero?

Ave balance =€342,385.42
Original cost of funds at date of fixing =0.82%
EURBID rate at date of breaking fixed term= - 0.38%
Number of days remaining on fixed rate=3,044

Calculation is €342,385.42 x 1.2% /36500 x 3,044 = €34,265.00

Thanks,
Melissa
 
Hi Melissa,

BOI's break fee looks correct, unfortunately.

The only people who are quoted a break free of zero are those for whom the interbank rate is higher now than it was than when they fixed.

Ulster Bank customers have their break fee capped at six months' interest, but BOI have no such cap.

If the interbank rate jumped to 0.0% tomorrow, the break fee would be €23,400

The break fee will be about €20k in three years' time, assuming interest rates haven't moved from today's levels and that you borrowed €400k over 30 years. It will be about €13k in in three years' time, assuming the 5-year interbank rate has gone to 0.0%

Bear in mind that you are protected against large interest rate rise for the next 8 years, which could happen if inflation returns – there are pros and cons to fixed-rate and variable mortgages.

If BOI change their rules to cap the break fee or allow large overpayments, you could take advantage of those.

MelissaB said:
Hello
I'm new to askaboutmoney, i see this thread is quite old but it's on the exact topic I'd like to ask about.
I have a mortgage with bank of ireland (two years into a ten year fixed rate), and i recently asked for a breakout fee, hoping to take a cheaper 2-year or 5-year rate.
The breakout fee i was quoted is €34,265.00

This seems extremely high compared to other's experience of this. I understand how it is calculated, and that the EURBID is very low at present, and also the term is much longer, but the breakout fee offered is shocking to me. Why is boi's breakout fee so high when other banks currently offer a breakout fee of zero?

Ave balance =€342,385.42
Original cost of funds at date of fixing =0.82%
EURBID rate at date of breaking fixed term= - 0.38%
Number of days remaining on fixed rate=3,044

Calculation is €342,385.42 x 1.2% /36500 x 3,044 = €34,265.00

Thanks,
Melissa
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Paul F said:
Hi Melissa,

BOI's break fee looks correct, unfortunately.

The only people who are quoted a break free of zero are those for whom the interbank rate is higher now than it was than when they fixed.

Ulster Bank customers have their break fee capped at six months' interest, but BOI have no such cap.

If the interbank rate jumped to 0.0% tomorrow, the break fee would be €23,400

The break fee will be about €20k in three years' time, assuming interest rates haven't moved from today's levels and that you borrowed €400k over 30 years. It will be about €13k in in three years' time, assuming the 5-year interbank rate has gone to 0.0%

Bear in mind that you are protected against large interest rate rise for the next 8 years, which could happen if inflation returns – there are pros and cons to fixed-rate and variable mortgages.

If BOI change their rules to cap the break fee or allow large overpayments, you could take advantage of those.
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Hi Paul
Thanks very much for the response, that explains a lot. I didn't realise the break free of zero is for those for whom the interbank rate is higher now than it was than when they fixed, and I didn't know ulster bank have a cap on the breakout fee. BOI seem to be very rigid in comparison to other banks at the moment, but i suppose that is all part and parcel of choosing a bank, unfortunately. The worked example given for the breakout fee at the time of drawdown was about 10% of the actual quoted fee now, so quite the shock. As you said boi may change their rules in future so all I can do is keep an eye on that, and the EURBID rates in general.
Melissa
 
MelissaB said:
Hi Paul
Thanks very much for the response, that explains a lot. I didn't realise the break free of zero is for those for whom the interbank rate is higher now than it was than when they fixed, and I didn't know ulster bank have a cap on the breakout fee. BOI seem to be very rigid in comparison to other banks at the moment, but i suppose that is all part and parcel of choosing a bank, unfortunately. The worked example given for the breakout fee at the time of drawdown was about 10% of the actual quoted fee now, so quite the shock. As you said boi may change their rules in future so all I can do is keep an eye on that, and the EURBID rates in general.
Melissa
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What interest rate did you fix at and what is the balance of your mortgage now?

I will assume 3.3% and €385k. That balance (>€300k) might make you eligible for Ulster Bank's 2.2%, 5-year fixed-rate mortgage. The amount of interest you would save (see here) is:
385000*(3.3-2.2)/100*5 = €21,175 over 5 years

Verify that your current rate is 3.3% – it might be 3.5%, in which case you would save more in interest.

If (break fee + solicitor's fees < interest saved), you should switch. That is not the case for you now but it could be in a few years.

Remember too that if you switch before 5 years, you won't get an extra 1% cashback from BOI (if that was part of the deal when you took out the mortgage.)
 
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Paul F said:
What interest rate did you fix at and what is the balance of your mortgage now?

I will assume 3.3% and €385k. That balance (>€300k) might make you eligible for Ulster Bank's 2.2%, 5-year fixed-rate mortgage. The amount of interest you would save (see here) is:
385000*(3.3-2.2)/100*5 = €21,175 over 5 years

Verify that your current rate is 3.3% – it might be 3.5%, in which case you would save more in interest.

If (break fee + solicitor's fees < interest saved), you should switch. That is not the case for you now but it could be in a few years.

Remember too that if you switch before 5 years, you won't get an extra 1% cashback from BOI (if that was part of the deal when you took out the mortgage.)
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The current balance of my mortgage is 377k, and i fixed at 3.5%.
 
MelissaB said:
The current balance of my mortgage is 377k, and i fixed at 3.5%.
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If you switched to Ulster Bank's 2.2%, 5-year fixed-rate today, you would save
377000*(3.5-2.2)/100*5 = €24,500 in interest over 5 years
and UB would give you €2,000 for switching, which is far short of the current break fee.

When you are 5 years into your 10-year fixed-rate, the break fee (assuming interbank rates haven't moved) will be:
327000 x 1.2 /36500 x 365*5 = €19,620
and you will probably have received another 1% cashback (€3,500) from BOI by then. Solicitors' fees for switching will be approximately €1,500. You would save 350000 x 1.2 /36500 x 365*5 = €21,000 in interest if UB still have the 2.2% 5-year fixed-rate offer.

So your "costs" would arguably be (19,620 + 1,500 - 3,500) = €17,260 (if you include the BOI cashback)
and your savings would be (21,000 + 2,000) = €23,000

But there are a lot of assumptions in these calculations.
 
Paul F said:
If you switched to Ulster Bank's 2.2%, 5-year fixed-rate today, you would save
377000*(3.5-2.2)/100*5 = €24,500 in interest over 5 years
and UB would give you €2,000 for switching, which is far short of the current break fee.

When you are 5 years into your 10-year fixed-rate, the break fee (assuming interbank rates haven't moved) will be:
327000 x 1.2 /36500 x 365*5 = €19,620
and you will probably have received another 1% cashback (€3,500) from BOI by then. Solicitors' fees for switching will be approximately €1,500. You would save 350000 x 1.2 /36500 x 365*5 = €21,000 in interest if UB still have the 2.2% 5-year fixed-rate offer.

So your "costs" would arguably be (19,620 + 1,500 - 3,500) = €17,260 (if you include the BOI cashback)
and your savings would be (21,000 + 2,000) = €23,000

But there are a lot of assumptions in these calculations.
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Thanks for laying it out Paul, that's really helpful.
 
Hi all

Great forum and great thread so i am hoping that i can get some advice from @RedOnion or @Paul F or anybody who is knowledgeable. Here's the background:

Purchased house for 505k in Nov 2015
Mortgage 390k from BOI
Fixed for 10 years @ a massive 4.2% (I obviously expected rates to increase back then, not go negative!!)

Current balance on the mortgage is circa 357k
Current house value 530k

I spoke to BOI yesterday and the break clause they want to charge me is circa 28k - so i would owe them 385k. This in spite of paying 110k in repayments in the last 5 years.

Please somebody tell me that someone at BOI has made a mistake somewhere.

So i borrow 390k 5 years ago and between repayments and charges i will end up having paid them close almost 500k in a 5 year period. That's a 25% mark up in 5 years for BOI.

So is there any room for negotiations with banks on the redemption charge? Can you haggle?

also is there any way around it. The only thing they said on the phone yesterday (now it was just through to the generic mortgage number) is that i could transfer it to another property.

My plan is to sell the house as i wanted to release my equity to do up a house that my girlfriend bought a couple of years ago. She paid 110k for it and the extension/repairs is going to cost in excess of 200k. (i wanted to release the equity in my house to pay most of this). Is there any way that i could transfer the mortgage onto this given that even with the works done i think it would be a real stretch to get the value of the house up to the 100% amount of the mortgage. If i could do it how would it work in reality? as in i sell my house for 530k does the money "just rest in my account" and then i use it to buy the house from my girlfriend, pay for all the renovations and then once out of fixed term pay back the amount on the mortgage? (actually that wouldn't work would it?)

Any and all advice gratefully received
 
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Hi @Panch18 ,

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 5.1)
  • A is the outstanding mortgage balance as it will be around Apr 2023 (halfway between now and Nov 2025; approximately €335k, assuming you have a 30-year mortgage)
  • R is the 10-year interbank rate available to the lender in Nov 2015 (approximately 0.94%)
  • R1 is the 5-year interbank rate available to the lender now (approximately -0.42%). We use the 5-year rate because it's the one closest to Y.
Like other people here I use this site to estimate the interbank rates.

So the break fee is A*(R-R1)*Y = 335000*(0.94 - (-0.42))/100*5.1 = €23,235 (approximately).

This estimate is a bit different to BOI's but not hugely (~15%). You can ask them for a worked example showing how the break fee was arrived at.

Check if you are due cashback to the value of 1% of your mortgage value in Nov 2020 – I'm not sure when BOI introduced the 2% + 1% cashback offer. If you are due this cashback, it's probably best not to break until you receive it.

If you switched to Ulster Bank's 2.2%, 5-year fixed-rate today (assuming you are eligible for it), you would save
357000*(4.2-2.2)/100*5 = €35,700 in interest over 5 years
and UB would give you €2,000 for switching (I believe).

(Avant Money's 2.1% rate for LTV ratios of 60-70% wouldn't be any better because there is no cash amount given for switching, it seems.)

As the saving exceeds the break fee plus solicitors' fees (€28k + €1,500 approx), you could consider switching, or you could wait to see if better offers appear.

But don't rely on my advice!

I'll leave it to someone else to try to answer your other questions.
 
Back in April 2020 I fixed for 3 years with Haven @2.55%, 30 months left, ~€190k remaining in the mortgage. I'd appreciate it if someone could make some calculations for me please. I can't get my head around them.
 
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