Early mortgage repayment with BOI

SuitableMinute

Hi, I'm a mortgage customer from KBC that was moved to BOI.

I'm looking to make an early repayment of around 30k for a mortgage I fixed summer 2022 for 10 years at 3%. I was expecting the fee to be 0 since rates have gone up quite a lot since then, but BOI came up to me and there'll be one, if I remember well in the order of hundreds but I requested them to send me the calculation by post.

I later read that BOI have changed the terms for KBC mortgage customers, which I had no idea since all communications pointed to BOI honouring the service https://personalbanking.bankofireland.com/app/uploads/BOI_Standard-Mortgage_Brochure_Communication-2.pdf page 12-13

With KBC, the early repayment fee was transparent and as long as mortgage rates went up, the fee was 0.

BOI seems to be using the interest rate they can get for my funds for the same period of time I fixed, e.g. they might be using the Irish government bond 10y which seems to be around 2.9%. What I still don't understand is where they get their cost of funding because back in summer 2022, rates were still very low

cython

Someone in BOI has their story wrong. All fixed mortgages that they acquired must be seen out under the KBC terms and conditions as those are the terms to which the customer (i.e. you) agreed. I suppose if there was something that was not covered by the KBC terms then BOI could feel free to apply their own judgement, but I'd say such things are few and far between.

In particular, BOI only allow overpayment to the tune of 10% of the monthly repayment without penalty, and only as a regular thing, whereas KBC (regardless of moves in interest rates) allow for overpayment of up to 10% of the loan principal within the fixed period. I don't know how this fits with your planned €30k early repayment, but if it comes in within the 10%, then BOI haven't a leg to stand on. If it exceeds that, then only on the excess can they levy a fee by anyone's calculation metric.

SuitableMinute

https://www.boards.ie/discussion/comment/120507381#Comment_120507381

It's indeed above the 10% of the principal so I think it's fair they calculate the break funding fee. What I fail to understand is how the fee is not 0. Both formulas in KBC & BOI take into account the market conditions when you fixed the interest rate(A) and the existing interest rate when you're breaking out of it(B), then calculate A - B multiplied/divided by a couple of other data points. If rates have gone up so much, like they've done in the past year, I'd have expected (A-B) < 0 and so the fee is then 0. No fees were the case any time I overpaid with KBC in the last 2 years(and I went beyond 10% of the principal) and rates were much more stable/flat

I'll post here whenever I get the breakdown of the calculation and follow up with them. BOI states things like "BOI in practice will use a different method to calculate this fee which will be more beneficial to you." and "We have tested KBC and BOI’s methods of calculating breakout fees. In these tests, using BOI’s formula resulted in a lower breakout fee for customers every time" which is clearly wrong for my case so I'll likely make a complaint to the central bank. I might be wrong and don't understand well the numbers, but who knows, wouldn't be the first time a bank tries to get away with overcharging