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

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RedOnion said:
Sorry, not the 2.55% rate, but a rate of 2.8% was available at the time the mortgage was applied for and drawn down. There are a few different threads where @Nowronganswer has asked about it, but they need to raise it with the bank & broker.
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I'm almost certain that the 2.8% rate did not exist three months ago.
 
Ha!

From my notes I think the 2.8% rate only arrived in mid- to late-January, so we would need to know exactly when @Nowronganswer drew down the mortgage to know if somebody missed something.

Edit: this Times article from 24th Jan mentions the rate cut.
 
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Paul F said:
From my notes I think the 2.8% rate only arrived in mid- to late-January
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Do you have details of the rate changes on 29th July last year to hand? @Nowronganswer should have qualified for the 'High Value' rate, which I thought was 2.8%? Unfortunately the press release only has the reductions, not the actual rates.

The poster applied in October, and drawdown happened in January. Looking at my reply to them before I was certain of myself, but can't find the rates now.
 
Paul F said:
From my notes I think the 2.8% rate only arrived in mid- to late-January, so we would need to know exactly when @Nowronganswer drew down the mortgage to know if somebody missed something.
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Apologies, you are absolutely correct, and it was only when I checked the timeline again I realised I was wrong when the poster brought this up in March - it looks like I had commented without asking about drawdown date.

@Nowronganswer the High Value rate for LTVs > 80% only came into being on 23rd January 2021. I understand now that you drew down before then. The rate you were offered was the best rate that was available from PTSB at that time for your cirumstances. I'm sorry for misguiding you on your previous post on this.

Your existing rate (2.95%) equals the best rate they make available for existing customers, so there is no benefit to you breaking & refixing, unless you are able to switch to another lender. However, this won't be possible until 12 months after your first drawdown.
 
Hi @RedOnion , do you know how to work out the percentage rate when factoring in the cashback. So mine is 2.95% fixed for 3 years, 2% cashback on 285k.
How do i work out the rate when the 2% is factored in(assuming i use the 2% to help repay).
Thanks.
 
A very crude way is to say you're getting that 2% over 3 years. So 2%/3 = 0.66%
And take that off your interest rate 2.95 - 0.66 = 2.29%

It's not technically accurate, but close enough.

If you switch after 2 years, then your effective rate with PTSB is only 1.95% (assuming no break fee!).

The PTSB one is further complicated if you are also getting 2% of every repayment back also. I worked it out somewhere last week for someone.
 
Godders said:
Hi, will there be an opportunity to renegotiate fix term mortgage with KBC if B of I take it over?
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I'd be interested in the answer to this too.

How would BOI estimate their cost of funds at the time of draw down if they didn't own the loan at that time?
 
evil_g said:
I'd be interested in the answer to this too.

How would BOI estimate their cost of funds at the time of draw down if they didn't own the loan at that time?
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Surely it's all going to be matter of fact. The information on the original cost of funds will be transferred to BOI.

The loan originator had a cost of funds X on origination date. The cost of funds faced by the new owner are Y today. As would be the case of the loan book wasn't sold, X remains fixed Y varies day to day.
 
That's a really useful way of considering it @RedOnion.

I acknowledge that you refer to it as a crude method. But in using that logic for example with rounded numbers. On a one year fix at 2.95% for a 300k mortgage with a switching fee for the solicitor of €1500, is it fair to say you are knocking 1.5% off the rate?

Net Cashback 4500, i.e 75% of the 2%.
Mortgage rate is therefore
2.95% - (0.75*2%) = 1.45%
 
Assumably though, the cost of funds would have to be factored in to the cost price of the loans BOI pays. Otherwise the break fees are free money for BOI.

Example: Say the break fee today for an arbitrary fixed rate mortgage with a balance of 100K is 2000 euro. If this is purchased by BOI for 100K, then surely BOIs cost of funds is whatever it is costing them today to fund that purchase, and not what it cost KBC.

I know that loans are sold in batches and not individually like in this example, but the principal remains the same. What if BOI pays more or less for these fixed rate mortgages that it has cost KBC to fund them? Break fees are intended to be compensation for the banks' costs and not penalties for the customer.
 
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That's what I was thinking, but I couldn't articulate it.

The requirement to provide a "reasonable" and transparent breakage fee, based on the lender's cost of funds, comes from law designed to protect consumers.

Is it wishful thinking that I might still have the right to stay on my fixed rate, but that the new owner of the loan would have to use a different base to calculate the breakage fee?

Also, might BOI prefer to move me onto one of their higher variable rates?

Is there any precedent for similar transfers between other lenders? (I presume there is)
 
The portfolio price will be based on the expected future income stream. There is likely to be some assumptions made about defaults, earlier repayments, future interest rates etc. So implicitly the KBC cost of funds are in their and should be reflected in the price.

I think we both agree that the current cost of funds will be whatever the current owner faces. However, I don't think it's in keeping with the mortgage directive to allow a loan purchaser to effectively reapply a different cost of funds for some point in the past.

If they could do that it wouldn't take much for a bank to magic up some intragroup transfers to ensure break fees were restrictively large.
 
I have 7 years left of a 10 year fixed with KBC. Roughly 130k left.

Was quoted 7k breakage fee last week.

Is there a way to track the fee? I'd bite if it went under 2k
 
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