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Moving mortgages - break clause

  • 28-02-2020 8:29pm
    #1
    levi
    Registered Users, Registered Users 2 Posts: 366 ✭✭


    I’m a bit confused about the cost of breaking our fixed rate mortgage in order to switch to a better rate. We’d like to change from a 4 yr fixed term with Ulster Bank which we’re halfway through to UBs 5 year fixed.

    My husband phoned the bank to enquire and they sent us out a letter advising us that the cost of breaking the fixed term is the lesser of 6 months interest and another calculation which equals (the amount left on the mortgage) x (the difference in the money market rate at the date of drawdown and the money market rate at the date of breakage) x the number of days left on the fixed rate/360.

    The letter we got from the bank just gives the 6 months interest cost which is €5.5kish but by my calculations, the other calculation should give a much lower break cost if I use the 12m euribor rates for a loose approximation. I would expect the break cost to be about €1k which would make changing interest rate worth our while.

    So my question is, does anyone have experience switching from a fixed rate and is my loose approximation wildly off or is the letter we received from UB just outlining the 6 months interest as a break cost very misleading?


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