KBC Breakage Fee - Does it break the EU Mortgage Credit Directive 2016?

paulbyrne

Registered User
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Hi Brendan,

KBC have taken a 25k breakage fee this week after dragging their feet all week with the redemption figures. We were in a 10 year fixed agreement (89months left) - Not ideal but we didn't think in a million years it would have been this high. We were estimating more in the range of maybe 4-5k.

This seems excessive as many articles online mention the EU Mortgage Credit Directive as a way to regulate these breakage fees. Are they allow use the standard convention breakage fee calculation while ignoring this rule?

Thanks in advance.
 
How long is a piece of string?

Unless you give us amounts, dates, and rates no one here can help.

hi, we checked the calculation for the break fee based on the figures that they gave us using the formula below and they appear correct.

B = (W - M) x T / 12 x A

My question is leaning more towards is this still allowed as the formula above or does the EU mortgage credit directive apply where the fee is likely to be a lot less?
 
In Ireland the Mortgage Credit Directive is implemented by a 2016 SI. See Part 10, Section 26 (2) here.

A creditor shall be entitled to fair and objective compensation, where justified, for possible costs directly linked to the early repayment, but shall not impose a sanction on the consumer, and any such compensation shall not exceed the financial loss of the creditor.

All the banks use a variant of the formula you've set out above which is basically their cost of funds at initiation less the interest they receive for putting the repaid amount on deposit for the remainder of the term. There are various interbank reference rates used in these formulas. This formula to me seems consistent with the wording of the SI as quoted above.

Without knowing the numbers the breakage fee seems plausible as interbank rates have come down in the last three years. You have a lot of term remaining and probably a big balance. All of these three factors (fall in rates, length of term, size of balance) may combine to generate a large breakage fee.

You would benefit from sharing the numbers to get more precise help. In my personal experience the banks sometimes make a mistake on this.
 
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