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

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Hi Paul, UB eventually contacted me on the 31st and admitted that they made an error on the break fee and then applied 6mths mortgage interest. The problem is most of the public wouldn't think to question the break fee and would take it at face value. How many other times has this happened? Thanks for the help with it
 
Well done for getting them to fix it but that's pretty shocking! As you say, most people would never suspect an error. How much more nonsense by the banks is going undetected?
 
Hi all, I have a BOI mortgage on a 3% fixed rate due to expire in September 2023. There will be a charge of 3200 or so to switch the mortgage. At the moment there is just over 300k left to pay over the next 26 years. I am looking to switch to somewhere to cover the breakage fee in cashback (ideally with some left over) and also to get a lower rate. From looking around I am getting a bit confused by the various options, would this be something that would make sense at this point or better to wait until the fixed rate expires?
 
Hi @Guest2022
  • When did you fix (year and month)?
  • What is your LTV (or your house value)?
  • What is your BER?
Did BOI promise you an extra 1% cashback if you stay for 5 years?
 
Paul F said:
Hi @Guest2022
  • When did you fix (year and month)?
  • What is your LTV (or your house value)?
  • What is your BER?
Did BOI promise you an extra 1% cashback if you stay for 5 years?
Click to expand...

Hi so we fixed in Sep 2018, at a 5 year rate. House value was 395k at time of buying but likely I would imagine has gone up (it was a new build).

Not 100% sure on the BER but its decent as its a new build.
 
Guest2022 said:
Hi so we fixed in Sep 2018, at a 5 year rate. House value was 395k at time of buying but likely I would imagine has gone up (it was a new build).

Not 100% sure on the BER but its decent as its a new build.
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Assuming your outstanding mortgage is €300k,
  • If your house is valued at €430k or more, your loan-to-value ratio will be just under 70% (300k/430k) – look for similar, nearby houses on the property price register that have sold recently. You will be eligible for Avant's 2.05% rate (which you can fix for 3, 4, 5 or 7 years). Most people here would say to fix for a longer period at this time.
  • If your LTV is above 70%, i.e., if your house is worth less than €430k, you could consider AIB's green mortgage (2.15%), fixed for 5 years. It comes with €2,000 cashback. Since your house is quite new, I'd imagine that the BER is B3 or higher, and so you are eligible for this rate.
N.B. If you are due to get an extra 1% cashback (around €3,250) for staying with Bank of Ireland for 5 years (until September 2023), you will lose out on that if you switch before then. But if you switch to the Avant 2.05% rate now, you will have made up that loss (€3,250) in a little over three years from now. And that is after allowing for the costs of switching (break fee and solicitor's fees). That is because the high BOI interest rate is costing you approximately €300k*0.95% = €2,850 in interest per year (versus Avant).
 
Cheers Paul, I don't see Avants 2.05% rate on their website unless I am missing it? I don't believe we are due any cashback from BOi once the 5 years passes either. So all in all it would make sense to switch to Avant if we can get the 2.05% rate even with the breakage fee of 3k from BOI?
 
Are you sure you are not due 1% cashback after 5 years? Did you get 2% cashback when you fixed with them?

Switching to Avant looks like a good choice for you whether or not your are due 1% cashback in September 2023 (even with the break fee and solicitor's fee).
 
I've just asked KBC for a redemption figure but would also like to check this figure when I get it (after reading Ben's post above).
Not sure where to locate a 10yr rate from May 2018 as this is when I fixed for 10yrs at 2.95% - so there's roughly 6.5yrs left on the fixed term and the A = 102K. Any help with the R and R1 figures would be much appreciated.

Thx,

Bren
 
Your break fee will be about €6,400. That's because interbank interest rates have fallen since May 2018 and you still have a long time left on your fixed rate.

Even switching to the best rate available (Avant's 1.95% rate) would only save you about €1,000/year in interest, so it would take a long time to make up for the cost of the break fee.

The only way that the break fee might reduce significantly in the short term is if the 6-year swap rate increases by a decent amount – keep an eye on it here (or here). But if that happens, mortgage interest rates might go up too.
 
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Yep got the 2% cashback when I fixed with them but have no recollection of a 1% after 5 years been mentioned. Will double check that though but pretty sure we don't have it. Thanks for the advise anyway, will have a chat to the broker!
 
Thanks Paul, I've received an early redemption fee from KBC of €5,500 and am strongly considering paying the fee and switching to Avant to avail of the 1% lower fixed rate.
I would be grateful for thoughts on the Pro's and Con's on this direction;

Current Mortgage Outstanding = 102K
Current Rate = 2.95% with 6yrs left on this fixed rate then remainder of term on Variable Rate
New Avant Rate = 1.95% fixed rate over 7 years at higher repayment but Mortgage fully repaid after 7yrs

My reasoning is basically to pay the mortgage off asap and switching to a lower rate also allows me to achieve this as I have already overpaid by the allowable 10% with KBC.
 
Paul F said:
@bren1916 What is your monthly repayment?
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Monthly payment = €985 currently and the switcher rate for a 7yr fixed is 1.95% which should be approx €1300 per month - which is fine as I am currently saving €500 p/m with no effective interest accruing on my savings.
 
@bren1916 If you switch to Avant's 7-year, 1.95% rate, you will be worse off by about €500 in six years' time (versus sticking with KBC). That's assuming you get the €1,500 switcher cashback with Avant, which you will only get if you use a broker who is an Avant "Gold Partner".

The €500 loss will actually be lower than that if you switch to Avant and continue to make overpayments.

Note that Avant won't give you a mortgage for less than €100k, so you'll need to act fast.
 
Thanks Paul, I'd be using the Gold Partner broker and ensure I'm borrowing just over the 100K to avail of the rate. So, based on the figures you would recommend staying with KBC and ring-fencing the potential overpayments (as I'm already maxed out on overpayments) to pay a lump sum at the end of the 6yrs rather than switching?
 
@Paul F, you kindly shared this link back on the 12th of January. The link no longer works. Is a similar graph available anywhere else?

ICE Benchmark Administration Ltd (IBA) Data To Be Removed From FRED | St. Louis Fed Economic Research

On January 31, 2022, FRED will no longer include data from ICE Benchmark Administration Limited (IBA). All series from the datasets below will be deleted from the FRED database, Excel Add-in, Mobile applications, APIs, and all other FRED services. ICE Libor RatesICE Swap RatesLMBA Gold Price...
fred.stlouisfed.org

I took out a 10yr rate from March 2018 at 2.95%. There is almost 6yr left on the fixed term and A = 238K. I'd like to roughly calculate the break-out fee.
 
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OkeyDokey said:
@Paul F, you kindly shared this link back on the 12th of January. The link no longer works. Is a similar graph available anywhere else?
Click to expand...
Unfortunately they stopped providing those graphs. You can look up the rate for any date here but they don't have graphs.

Your break fee should be around €1,900. [Edit: this is wrong. Corrected in a later post.]
  • Who is your lender?
  • What is your monthly repayment?
  • What rate are you on currently?
  • What is your LTV?
  • What is your BER?
 
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