Key Post Understanding Fixed Rates breakage costs

Hi. I'm with KBC on a 10 yr fixed. The mortgage is quite large and I want to pay off a small amount and switch to a lower rate through getting to a new LTV threshold. I received a quote of a significant break fee greater than those mentioned in this thread. I have the workings from them and it's a function of their interbank rates coming down. Any options to challenge them on this?
 
MauriceF said:
Any options to challenge them on this?
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It's probably correct. I haven't found an error yet in ant KBC break fees I've checked.
It's a function of interbank rates, and the number of years remaining on the fixed rate. The interbank market has dropped massively since last summer; rates could be down close to 1% on 10 year term. With 9 years left, the break fee would be 9% of your balance (really simple example).

However, don't forget with KBC you can pay off a lump sum, up to 10% of the balance, without any break fee.
 
Thanks @RedOnion for quick reply. yes we can pay the 10% but unfortunately rate stays the same.
 
RedOnion said:
The interbank market has dropped massively since last summer; rates could be down close to 1% on 10 year term.
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Hi Red,

Will current events have an effect on these interbank rates? Personally speaking I fixed for 4+ years in June 2018, €458k @ 2.6%, around €430k remaining, fixed term ends Sept 2022. Any relatively recent break fee I have received has been around €5k. My limited understanding is that in order for this break fee to go down, interbank rates would need to go up? As such, how might interbank rates be effected by current events?

Thanks,
GN
 
Hi All, I found post here very useful in my situation, wanted to give back my feedback. I have fixed rate with KBC since Jul/Aug last year, tried to figure out the rates that they are using for calcs, wasn't far off myself when I requested breakage fee quote in late Feb however was quoted nearly 2k to break the chain of my fixed mortgage ,they never send me the quotation though .. I kept an eye though as work in finance, requested quote last week and voila have now been quoted 0 to break free. I used the below to roughly follow rate changes, COVID impact has been huge even though rates are below zero. Perhaps someone will find it helpful: https://tradingeconomics.com/ireland/interbank-rate
 
We took out a 5 year fixed mortgage with UB in Nov 2018 for 288k @2.9%. Repayment of 1130 monthly and increased to 1357. Balance approx 276k. I did a rough estimate of breakage fee and it is approx €1550. Not sure if that is correct. Also do I then go back and fill out a new mortgage application to start the process again? Thanks.
 
@MsCutha
You don't need to do a mortgage application to change rates. It's very straight forward.

Phone UB and ask for a break fee and rate options. They'll send you a letter. However, the letter takes ages so phone them again after 2 days and ask what the break fee is. Once the letter has generated they should be able to tell you.

Also, have a look at this thread from a few months ago when I looked at a few UB cases:

Case Study: Internal Mortgage Switch UB

Lender: UB Amount of mortgage balance outstanding: €303k Date you fixed: November 2018 Period for which you fixed: 4 years Fixed rate: 2.6 Term left: 3yrs Breakage fee: €2500 (worked out using ICE report data) Approx interest cost in next 3years (whilst on 2.6%) = €23.6k Approx Balance after...
www.askaboutmoney.com
 
Thanks so much Redonion.
I called them today and they will send me the letter. They did say the new interest rates are 5 year @2.6% which is €1069/month and 2 year at 2.3% (€1026) compared to our €1130.
I guess it will come down to the breakage fee. Thanks again.
 

is the risk here that its 0 today but by the time you switch it can be 2k again, or do you break out now onto variable until the switch goes through
 
Blackrock1 said:
is the risk here that its 0 today but by the time you switch it can be 2k again, or do you break out now onto variable until the switch goes through
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You are at the mercy of the rates until you pay down the loan, if you go to a variable you'll need to time it well as your interest rate will likely increase and you'll be accruing interest daily. Know your daily interest amount on the new variable rate you'll be on so you can gauge the costs as the days pass by on the variable rate.
 


Hi RedOnion (or any other knowledgeable poster).

We fixed a portion of our mortgage with KBC for 10 years in June 2018.

We don't need to break it just yet, but I'd like to keep an eye on when might be a good time (not now by the sounds of things).

Is there any particular metric that I should use as a proxy for KBC's cost of funds at that link you've provided? i.e EUR Rates 1100 or EUR Rates 1200? Or does it matter?

And should I then select the "Tenor" that matches the period remaining in the fixed term? i.e. 10 years in June 2018, and then 8 years in June 2020?
 
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The customer support guy I spoke to in KBC told me that he wasn't sure that they could give me a written breakdown of the breakage fee.

I told him it was a pretty standard request. He said he'd check and get back to me.

They have to provide that on request don't they?

[Edit] I see this is answered in the opening post.

A bank must provide a written breakage quote to the consumer, and list all assumptions used. All assumptions must be reasonable, and justified.
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What are you dividing by 360? Should it be 365 you are driving by?
 
Hi, Thanks very much for all your help giving out knowledge to help others save quite a few bucks

My question is if break fee is the same whether you switch bank or you change the mortgage type within the same bank (e.g. go for variable where you have fixed term)? If they tell you there's no cost, does it apply for any of them?

Thanks in advance
 
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