Key Post Understanding Fixed Rates breakage costs

[Brendan Burgess]

Yes, the break fee is completely independent of what happens next.

If the break fee is zero, it's zero.

So you raise a good point. If you are thinking of switching and you get a quote of a nil break fee, then break there and then. Don't wait until you have decided what to do, as interest rates might change while you are thinking about it, and a break fee might then be payable.

In theory, a lender could say "We will waive the break fee if you fix again for 3 years or if you don't switch to another lender" but, in practice, they don't do that.

Brendan

 

[MortgageMark]

Hi there,
Would appreciate if someone could validate the KBC break funding fee I have been quoted. My main query is that the definitions of the rates used seem to vary from the definitions used on the KBC website

Thanks in advance

		Comments
		B = (W-M)*(T/12)*A
W	1.01%​	Wholesale rate as provided by Central Bank on 19/01/2021
M	-0.37%​	Margin rate at time of fixing - April 2018
T	88​	Months left on fixed rate term
A	€ 211,940.00	Balance on mortgage as of Jan 2021
B	€ 21,448.33	Break funding fee

 

[RedOnion]

@MortgageMark
The labels make absolutely no sense, but the calculation looks correct.
The 10 year interbank rate in April 2018 was c. 1.01%
The 7 year rate now is c. -0.37%

 

[MortgageMark]

@MortgageMark
The labels make absolutely no sense, but the calculation looks correct.
The 10 year interbank rate in April 2018 was c. 1.01%
The 7 year rate now is c. -0.37%

Hi RedOnion,

Thanks for your reply, the labels were what was discussed over the phone and didn't make much sense to me either (still waiting for written confirmation of calculations) - but your explanation of 7 year and 10 year rates makes sense to me now. I suppose it's the downside of negative interest rates.

Does anyone have any experience of negotiating a reduction in these rates? KBC have said informally that the only way the fee could be waived would be to sign up for another 10 year fixed rate mortgage, but I'd be reluctant to tie myself in to (a) higher rates than currently available (c.2.3% for 3 year fixed) and (b) facing a possible future break funding fee if I had to sell in the future for some unforeseen reason.

 

[evil_g]

Hi RedOnion,

Thanks for your reply, the labels were what was discussed over the phone and didn't make much sense to me either (still waiting for written confirmation of calculations) - but your explanation of 7 year and 10 year rates makes sense to me now. I suppose it's the downside of negative interest rates.

Does anyone have any experience of negotiating a reduction in these rates? KBC have said informally that the only way the fee could be waived would be to sign up for another 10 year fixed rate mortgage, but I'd be reluctant to tie myself in to (a) higher rates than currently available (c.2.3% for 3 year fixed) and (b) facing a possible future break funding fee if I had to sell in the future for some unforeseen reason.

I wonder what would happen if you signed up to a new ten year term, and then asked for a break fee the next day?

 

[Paddygreen]

Hi all... would someone more knowledgeable be able to point me in the direct of where I would get the wholesale Central Bank rate and marginal rate for a 5 year fixed rate in Aug 2019.

Got quoted a ballpark breakage fee on the phone today with paperwork to follow sometime next week.

Just wanted to use the KBC formula above to see if the break fee quoted was reasonable.

Thanks in advance.

 

[NDynamite]

Hi there,
Same question really where can I look up the interbank rates in Ireland (historically) so I can do these calculations myself... ?