hi rustbucket
we're on quite a high fixed rate (5.45%) so yep, they're charging us for breaking out to a lower rate. However, I've been working through it and it doesn't seem like they're calculating the breakage cost fairly.
As far as I can see, breakage cost is supposed to be: (balance left on loan) x (time in years left on fixed rate deal) x (difference between the deal rate and the rate being switched to)
I think they're actually calculating it as if we were going to switch to the current variable rate for the next 7 months (which is 3.49%) whereas we intend to be on the 5yr fixed of 4.39%. So they'll be getting more money from us so the breakage cost shouldn't be so high.
My calculations are:
260,368 x (7/12) x (5.45%-4.39%) = 1,609
But they've come up with 2,404!
So maybe that's my first thing, I should get back in touch with them tomorrow and establish their basis for the breakage cost. If it went down to 1,609 and then we were saving 600 over the next 7 months, the net cost would be 1K and that would be much more attractive.
If anyone with any knowledge of this stuff see flaws in my workings, please let me know, thank you!