Mortgage - low fee for breaking fixed rate

randombar · 05-04-2019 12:58pm

KD11 wrote: »

She did say that but had no idea why some people have to pay a few euro and others a few hundred euro. One customer wanted to break 6months into a 3yr term (€300,000) and it actually cost them zero. Like someone else mentioned it can change week by week what figure you get. If i have to pay that amount anyway, I may as well switch banks.

Examples taken from another site.

Some worked Examples:
Example 1 - I fix and I break immediately
I fix my rate with Bank of Ireland today for 2 years at 3.2%.
I decide 1 month later that I want to switch to EBS to get the 2% cash back from them.
The rate BoI borrowed from the market last month, and the rate they can get for lending to the market today is the same, so there might be a marginal breakage cost.
(In this case there might be a marginal breakage cost, as there are dealing costs in settling fixed rate contracts)

Example 2 - The rates at which banks lend to each other fall
I borrow €100,000
I fix my rate with Bank of Ireland today for 2 years at 3.2%. BoI's funding rate in the market is 0%.
After one year, I decide I want to switch to another lender.
The one year inter-bank Market rate is now -0.4% in the market.
Bank of Ireland can relend to the market at -0.4% instead of the 0% they borrowed at so the breakage fee is
€100,000@ 0.4% x 1 year = €400

Example 3 - rates rise
I borrow €100,000
I fix my rate with Bank of Ireland today for 2 years at 3.2%. BoI's funding rate in the market is 0%.
After one year, I decide I want to switch to another lender.
The one year interbank rate is now +0.25%.
Bank of Ireland can relend at +0.25% instead of the 0% they originally borrowed for, so there is no cost to them, so there is no breakage fee to the customer.

Former Former · 05-04-2019 1:06pm

This isn't a bargain alert, it's consumer advice. This title of this thread should be "review your finances on a regular basis"

The OP got a good deal because it was in the bank's interest to do so. He/she had one year left on a fixed rate. At the end of that year, he might have taken his business elsewhere, but by giving him a nice deal, the bank now has his business for another two years.

If someone else rings up and they have three or four years left on a fixed rate, or wants to move to a different bank, there is a lot less incentive for the bank to do anything for them and they're not going to get as good a quote.

So if you can find a better mortgage, get a reasonable fee to break your fixed rate and factor in legal fees etc - and still come out on top, then it's a bargain.

Soarer · 05-04-2019 1:11pm

I always thought thought those "2% cashback on drawdown" offers stated you had to stay with the bank for X years or the cashback would have to be repaid.

But from reading this, you can change, get cashback, change, get cashback, ad infinitum?

lawred2 · 05-04-2019 1:14pm

Soarer wrote: »

I always thought thought those "2% cashback on drawdown" offers stated you had to stay with the bank for X years or the cashback would have to be repaid.

But from reading this, you can change, get cashback, change, get cashback, ad infinitum?

central bank pulled the plug on that practice

as they did with unjustifiable/penal break fees

amcalester · 05-04-2019 1:15pm

Former Former wrote: »

The OP got a good deal because it was in the bank's interest to do so. He/she had one year left on a fixed rate. At the end of that year, he might have taken his business elsewhere, but by giving him a nice deal, the bank now has his business for another two years.

If someone else rings up and they have three or four years left on a fixed rate, or wants to move to a different bank, there is a lot less incentive for the bank to do anything for them and they're not going to get as good a quote.

So if you can find a better mortgage, get a reasonable fee to break your fixed rate and factor in legal fees etc - and still come out on top, then it's a bargain.

The bank didn't give the OP a deal, the cost to break would have been the same if he was moving to another bank or staying with his existing.

Banks have no control over how much it costs to break a fixed term mortgage

amcalester · 05-04-2019 1:17pm

Soarer wrote: »

I always thought thought those "2% cashback on drawdown" offers stated you had to stay with the bank for X years or the cashback would have to be repaid.

But from reading this, you can change, get cashback, change, get cashback, ad infinitum?

lawred2 wrote: »

central bank pulled the plug on that practice

as they did with unjustifiable/penal break fees

The banks changed the structure of their cash back offerings, instead of 3% upfront and a clawback it's now 2% upfront and 1% after 5 years.

Soarer · 05-04-2019 1:21pm

lawred2 wrote: »

central bank pulled the plug on that practice

as they did with unjustifiable/penal break fees

Cheers lawred2.

So you could, in theory, swap every couple of months without penalty?

Also, just for complete pig iron....
January, I move from AIB to BOI, get cashback.
July, I move from BOI to EBS, get cashback.
January, I move from EBS to KBC, get cashback.
July, I move BACK to AIB from KBC....get cashback?

sternn · 05-04-2019 1:25pm

Former Former wrote: »

This isn't a bargain alert, it's consumer advice. This title of this thread should be "review your finances on a regular basis"

The OP got a good deal because it was in the bank's interest to do so. He/she had one year left on a fixed rate. At the end of that year, he might have taken his business elsewhere, but by giving him a nice deal, the bank now has his business for another two years.

If someone else rings up and they have three or four years left on a fixed rate, or wants to move to a different bank, there is a lot less incentive for the bank to do anything for them and they're not going to get as good a quote.

So if you can find a better mortgage, get a reasonable fee to break your fixed rate and factor in legal fees etc - and still come out on top, then it's a bargain.

After doing a bit more research, the EU directed the banks to change the way they calculated the breakage for those in a fixed rate loan back in December 2017. The EU directive means banks can only charge a penalty based on what they would earn from keeping the mortgage funds on deposit. Anyone looking at deposit interest rates at the moment will see that they are extremely low. Not all banks have to change the way they calculate a break fee, but BOI are one of those that have done so.

Obviously those who have a longer fixed rate period and bigger mortgage value will pay more. But if the bank uses this method of calculation and the drop in mortgage interest rate is somewhat significant, the savings in interest being paid will outweigh the charges.

Yes, this is not a "bargain" by your definition, but it should be made aware to people as it's a 5 minute phone call, signing a letter that is posted out to you by the bank, that may potentially save someone / a couple a decent amount in interest per month.

I think most people would agree that if you had to pay less money to a bank by following a couple of steps that they were not aware of, then it is a bargain.

relax carry on · 05-04-2019 2:05pm

Currently switching to a lower fixed rate of 2.9% for 5 years after breaking out of 7 year fixed at @3.99%. am currently 2.5 years in to the 7 year rate. It's costing 1500 with Ulster Bank but the savings over 5 years are just over 5000. Will use the additional savings to overpay @ 10% each month to increase the savings.

Will look at this every year from now on.

lawred2 · 05-04-2019 2:45pm

Soarer wrote: »

Cheers lawred2.

So you could, in theory, swap every couple of months without penalty?

Also, just for complete pig iron....
January, I move from AIB to BOI, get cashback.
July, I move from BOI to EBS, get cashback.
January, I move from EBS to KBC, get cashback.
July, I move BACK to AIB from KBC....get cashback?

if the rates are in your favour then yes

Cyrus · 05-04-2019 2:52pm

Soarer wrote: »

Cheers lawred2.

So you could, in theory, swap every couple of months without penalty?

Also, just for complete pig iron....
January, I move from AIB to BOI, get cashback.
July, I move from BOI to EBS, get cashback.
January, I move from EBS to KBC, get cashback.
July, I move BACK to AIB from KBC....get cashback?

banks have started to tell people that they will only accept them if they have been with their previous lender for 12 months, so you need to be creative to avoid that, see a few threads on askaboutmoney :pac:

nok2008 · 05-04-2019 3:40pm

The BOI 2% initial cashback is given to you on drawdown plus 45 working days. But the mortgage person in bank told me that you can then change bank without penalty.
You must also ensure that your cashback is greater than your solicitor fees in order to make financial sense and the interest rates. I think that there may be some LTV ratios caveats on the cashback i.e. you might not be entitled to cashback if LTV <50%. Not 100% sure on this though and all banks will have different small print.

cruizer101 · 05-04-2019 7:05pm

I wonder would it be possible to get a good rate from a solicitor to do this multiple times.
I dont know the ins and outs of what is involved in the conveyancing but would think might be bit less work in doing the same property to same owners.

Klonker · 05-04-2019 10:55pm

Little bit off topic I guess but a related issue. How's the penalty calculated if I was for example to pay a lump of 50k off my mortgage? I presume it would have to be cheaper than breaking out of contract completely.

Cyrus · 05-04-2019 11:06pm

Klonker wrote: »

Little bit off topic I guess but a related issue. How's the penalty calculated if I was for example to pay a lump of 50k off my mortgage? I presume it would have to be cheaper than breaking out of contract completely.

It’s proportional

James Bond Junior · 05-04-2019 11:14pm

Just had a skim through and said I'd give my two cents. I was with KBC at 3.9% and moved 9 months after I drew down to Ulster Bank at 3.1%. They paid me €2k so it covered fees and a revaluation but I decided to keep repayments the same which shaved a whole 2 years off my term. UB allow you to move your LTV to a lower amount without penalty so I was able to move it down to well below 3% saving me more again. I will probably fix soon enough but it makes sense to check things out every 6 months rate wise but also keep an eye on the property price register to see how other property prices may effect your own LTV.

kodak · 06-04-2019 9:00am

sternn wrote: »

Definitely contact the bank. Most people don't bother ever getting their house revalued for mortgage purposes. Banks generally offer better interest rates as the LTV gets lower.

Moved LTV with aib, went from 3.15 to 2.75 % , more than 80 to less than 50% LTV. Cost 150 and about 1 hour in total. Ill have the cost of the valuation back in a few months and I think it worked out at saving 10k over the mortgage. Very simple to do too. Would definitely recommend.

Millem · 06-04-2019 11:23am

Aib have quoted me thousands to break

Franz Von Peppercorn · 06-04-2019 11:32am

nok2008 wrote: »

The BOI 2% initial cashback is given to you on drawdown plus 45 working days. But the mortgage person in bank told me that you can then change bank without penalty.
You must also ensure that your cashback is greater than your solicitor fees in order to make financial sense and the interest rates. I think that there may be some LTV ratios caveats on the cashback i.e. you might not be entitled to cashback if LTV <50%. Not 100% sure on this though and all banks will have different small print.

There is a penalty though - the 1% you lose out on after 5 years. Most people are not calculating that.

Cyrus · 06-04-2019 1:53pm

Franz Von Peppercorn wrote: »

There is a penalty though - the 1% you lose out on after 5 years. Most people are not calculating that.

It's not a penalty if you are saving money by moving

LizardKing · 08-04-2019 10:25am

Howdy .. So I have BOI fixed rate for 3 years. I have about 6 months left on this rate. When it finishes I go automatically onto BOI variable rate ..if I stay on that I get 1% cashback after year 5 (this will not be worth it in my opinion)

Sounds like I can just change now to a new fixed rate for 2 years on 2.9% ? So less monthly payments

Can you not just do it online via this form ?

https://form.bankofireland.com/personal-banking/borrow/mortgages/mortgage-rate-change/

Franz Von Peppercorn · 08-04-2019 10:28am

LizardKing wrote: »

Howdy .. So I have BOI fixed rate for 3 years. I have about 6 months left on this rate. When it finishes I go automatically onto BOI variable rate ..if I stay on that I get 1% cashback after year 5 (this will not be worth it in my opinion)

Sounds like I can just change now to a new fixed rate for 2 years on 2.9% ? So less monthly payments

Can you not just do it online via this form ?

https://form.bankofireland.com/personal-banking/borrow/mortgages/mortgage-rate-change/

you get the cash back by staying with BOI. I don’t think you have to be on the variable.

amcalester · 08-04-2019 10:28am

LizardKing wrote: »

Howdy .. So I have BOI fixed rate for 3 years. I have about 6 months left on this rate. When it finishes I go automatically onto BOI variable rate ..if I stay on that I get 1% cashback after year 5 (this will not be worth it in my opinion)

Sounds like I can just change now to a new fixed rate for 2 years on 2.9% ? So less monthly payments

Can you not just do it online via this form ?

https://form.bankofireland.com/personal-banking/borrow/mortgages/mortgage-rate-change/

Double check this but I don't think there was anything in the BOI T&C's that you had to stay on the variable rate to get the extra 1% cashback, just that you still hold a BOI mortgage and current account.

Klonker · 08-04-2019 10:49am

LizardKing wrote:

Howdy .. So I have BOI fixed rate for 3 years. I have about 6 months left on this rate. When it finishes I go automatically onto BOI variable rate ..if I stay on that I get 1% cashback after year 5 (this will not be worth it in my opinion)

As far as I'm aware you'll get the 1% cash back after 5 years if you are still with BOI, I don't think it matters what type or term contract you are on in that time.

vincedh · 08-04-2019 11:06am

The banks use different methods for calculation of break fees. With base interest rates not moving for the past few years, break fees are miniscule in most cases except for AIB who take a different view on the calculation.
On the cashback deals. Some solicitors were doing deals for a multiple switch as the extra work involved was not extensive. However the banks have now caught onto the loophole and are now insisting on the mortgage being with the previous lender for a minimum of 12-24 months.
But do be ware of cashback deals. Banks are not charities and cashback deals usually cost the more in the long run especially if the bank has horrendous standard variable rates like ptsb or do not permit current customer avail of all fixed rate options (again ptsb are the worst in this regard).
But certainly if you have a fixed rate, check and see if one of the current fixed rate deals is better for you. The break fee in most cases is miniscule or zero.

LizardKing · 08-04-2019 11:35am

just went through the online link to give this a go. Will let people know if it works out

Thanks OP

mrcheez · 08-04-2019 11:58am

LizardKing wrote: »

just went through the online link to give this a go. Will let people know if it works out

Thanks OP

I'm guessing it's this link? https://form.bankofireland.com/personal-banking/borrow/mortgages/mortgage-rate-change/

what does that form do when you submit it?

Just for them to review your details and get back to you with options?

EDIT: ah I found the parent page that explains it: https://personalbanking.bankofireland.com/borrow/mortgages/articles/existing-customer-want-to-change-the-interest-rate-on-your-mortgage/

cool, I'll give it a shot

angeldelight · 08-04-2019 12:53pm

When you want to switch mortgage I presume it’s a whole new application as in they’ll be looking at your employment etc again?

Del007 · 08-04-2019 1:45pm

angeldelight wrote: »

When you want to switch mortgage I presume it’s a whole new application as in they’ll be looking at your employment etc again?

Salary cert, home insurance cert, home valuation, can't remember what else they looked for

J@yK@y · 08-04-2019 1:50pm

Hi
I am on a discounted variable with UB (3.1%). I see I can take out 4 yr fixed at 2.6% also from UB which would be a saving. However, my question is what happens at the end of Year 4 ?

I suspect I go onto the standard variable at that time (currently 4.3%) and need to contact them to take any of the other variable or fixed offers at that time?
I presume I don't have the option to return to the var 3.1% unless it is still offered?

thanks

vincedh · 08-04-2019 3:09pm

J@yK@y wrote: »

Hi
I am on a discounted variable with UB (3.1%). I see I can take out 4 yr fixed at 2.6% also from UB which would be a saving. However, my question is what happens at the end of Year 4 ?

I suspect I go onto the standard variable at that time (currently 4.3%) and need to contact them to take any of the other variable or fixed offers at that time?
I presume I don't have the option to return to the var 3.1% unless it is still offered?

thanks

you'd automatically go onto the standard variable rate, but Ulster will also let you choose to go onto any other rate they offer at the time. So you could choose a further fixed rate at the rates they offer then. Ulster, like AIB will allow all customers access all rates offered

Bobeagleburger · 08-04-2019 8:01pm

vincedh wrote: »

you'd automatically go onto the standard variable rate, but Ulster will also let you choose to go onto any other rate they offer at the time. So you could choose a further fixed rate at the rates they offer then. Ulster, like AIB will allow all customers access all rates offered

Or switch again

LizardKing · 10-04-2019 12:40pm

LizardKing wrote: »

just went through the online link to give this a go. Will let people know if it works out

Thanks OP

So have heard nothing back from BOI as yet . No email, sms .. nowt.

I know they are really understaffed so am expecting a slow turn around :rolleyes:

They make it sound sooo easy though!!!

BOI wrote:

You can do this all online, there’s no need to call or visit a branch:

Select the “Request a new rate” button below

Complete the online form

We will then email and text each person named on the mortgage

Open the email and use the 6 digit code within the text to access your request securely

Follow the online instructions to request your new rate…. and that’s it!

bazz26 · 10-04-2019 12:47pm

Or just ring them.

LizardKing · 10-04-2019 1:33pm

bazz26 wrote: »

Or just ring them.

I'll just wait thanks .. if I hear nowt I'll ring after a week or so... wanna see how/if the service online works..

I'm sure others are interested too

The Megaphone · 10-04-2019 1:36pm

bazz26 wrote: »

Or just ring them.

Great advice - definitely call them!

I phoned earlier today and it was the easiest 3 minute conversation ever - gave my details, the Rep gave a quick overview of the available rates and possible savings (€60/month) so now they are sending out the paperwork for me and the wife to sign and return!

Also was quoted a €0 break/funding fee - my own situation is that I have two separate mortgages with BOI for the purchase and refurbishment of the same property, and both were fixed for 3 years @ 3.1% with 7 months to run (before then returning to a variable rate for the rest of my life

).

So big thanks to sternn for this one!

LizardKing · 12-04-2019 9:47am

Got the letter this morning as I was running out the door.

Only had a quick check

It didn't quote a break fee and had some initial blurb about possible charges for breaking fixed rate and refer to section D ( section D had some formula they use for calculating the fee but no actual fee (that I could see)

It had a number of rate options listed including the 2 year 2.9% and also a 3 year 3.0%

I may be better off waiting to change when my fixed rate ends.

Even thought they suggest "You can do this all online, there’s no need to call or visit a branch:"

I'm thinking this may require a PHONE call after all as suggested by others in order to get the calculated break fee figure from them.

mrcheez · 12-04-2019 10:58am

I chatted to them as well, I'd only save approx €15 / month going to 2.9% 2 Year and my breaking fee is €81 so not THAT much of a saving

...BUT...

she said that you can pay in a lump sum off the capital without penalty when changing the rate. Normally you'd have to wait until the fixed term had ended, so that's handy for anyone in a position to pay in a chunk of cash.

The savings for this are huge.

Klonker · 12-04-2019 11:07am

mrcheez wrote:

she said that you can pay in a lump sum off the capital without penalty when changing the rate. Normally you'd have to wait until the fixed term had ended, so that's handy for anyone in a position to pay in a chunk of cash.

You can pay off lump sum without ending your contract and it's done at a proportionate level. For example, if your outstanding mortgage is â‚¬200k and they give you a quote of â‚¬1,000 to break the fixed term, if for example you didn't fully break and decided to just pay off â‚¬50k lump some it would only cost â‚¬250. Might be a better option if your main motivation is to make a lump sum payment and if the difference in the interest rates isn't much.

mrcheez · 12-04-2019 11:15am

Klonker wrote: »

You can pay off lump sum without ending your contract and it's done at a proportionate level. For example, if your outstanding mortgage is €200k and they give you a quote of €1,000 to break the fixed term, if for example you didn't fully break and decided to just pay off €50k lump some it would only cost €250. Might be a better option if your main motivation is to make a lump sum payment and if the difference in the interest rates isn't much.

Well it's probably better to drop down to 2.9% from 3.1% anyway if I'm going to have to pay a breaking fee to pay in a lump sum.

I'm not allowed to pay in a lump sum on a fixed term without breaking it.

Klonker · 12-04-2019 11:07pm

mrcheez wrote:

Well it's probably better to drop down to 2.9% from 3.1% anyway if I'm going to have to pay a breaking fee to pay in a lump sum. I'm not allowed to pay in a lump sum on a fixed term without breaking it.

Did you see my example above though? Would only cost 250 to pay the lump sum off but 1000 if you wanted to change rates as when paying the lump sum it's viewed as you're only breaking 50k of the mortgage but if changing rates you are breaking the complete 200k mortgage so will have to pay 4 times more of a break fee.

mrcheez · 13-04-2019 9:04am

Klonker wrote: »

Did you see my example above though? Would only cost 250 to pay the lump sum off but 1000 if you wanted to change rates as when paying the lump sum it's viewed as you're only breaking 50k of the mortgage but if changing rates you are breaking the complete 200k mortgage so will have to pay 4 times more of a break fee.

right, I'll be checking my decisions with my financial adviser as well just to be extra sure before committing to anything.

bunderoon · 14-04-2019 12:28am

This is slightly off topic as its not about changing from one fixed to another - but for those reading this and havent acted in the last few years; definitely ring the bank.

For example - we are 5 years into a 30 year small mortgage and were on variable 4.5 % and rang and changed to a 5 year fixed. Dropped down to 3% and by 70 euro a month. This gives us time to review and plan our next move for when the fixed term is up.

LizardKing · 15-04-2019 10:26am

LizardKing wrote: »

Got the letter this morning as I was running out the door.

Only had a quick check

It didn't quote a break fee and had some initial blurb about possible charges for breaking fixed rate and refer to section D ( section D had some formula they use for calculating the fee but no actual fee (that I could see)

It had a number of rate options listed including the 2 year 2.9% and also a 3 year 3.0%

I may be better off waiting to change when my fixed rate ends.

Even thought they suggest "You can do this all online, there’s no need to call or visit a branch:"

I'm thinking this may require a PHONE call after all as suggested by others in order to get the calculated break fee figure from them.

Rang this morning. I misjudged my fixed term and have longer left than I thought .. my break fee was €357

I think I will wait until closer to the end of my current 3.0% fix before jumping. Hopefully the 2.9% is still available then and the break fee should come way down.

Prezatch · 15-04-2019 2:49pm

Just to note, AIB lowered their fixed interest rates last Wednesday and introduced a 10 year fixed rate. A sign of potential lower fixed rates coming from competitors soon or at least more extensive options including longer terms. Compared to Europe we are still well behind the curve

Soarer · 15-04-2019 3:19pm

Speaking of AIB, the fact you can get a 3 year fixed for 2.85% and a 10 year fixed for 3.3% kinda points to interest rates falling sometime soon?
Can't see why they'd off 2.85% if rates are gonna go up.

Thegalwayman · 19-04-2019 9:27pm

21 yrs left on Ulster Bank 3.2% fixed til March 2021 530 breakage fee and option of 4 yrs at 2.6%. Saves 60odd a month. Pity UB are so slow to do anything requested breakage fee on 11th April received in todays post and it's valid until 26th April but I have to get rate change request form from them which can't request until 23rd with the bank holiday and then I won't receive it til May so presumably will be on variable rate of 4.3% for a few weeks

hatchman · 19-04-2019 9:39pm

Thegalwayman wrote:

21 yrs left on Ulster Bank 3.2% fixed til March 2021 530 breakage fee and option of 4 yrs at 2.6%. Saves 60odd a month. Pity UB are so slow to do anything requested breakage fee on 11th April received in todays post and it's valid until 26th April but I have to get rate change request form from them which can't request until 23rd with the bank holiday and then I won't receive it til May so presumably will be on variable rate of 4.3% for a few weeks

I switched from 4 year fixed to another four year fixed in Jan with UB and they said they never got request which was done online what's new with UB online ! But I raised a stink and it was all refunded. So if I were u I would keep calling and demanding !

Cona · 24-04-2019 2:12pm

Question for those who have moved their mortgage to another bank....Do you need to provide all the same documentation to the new bank as you did when originally applying for mortgage? i.e 6 months bank statements, salary certs etc?

grahamor · 24-04-2019 3:23pm

Cona wrote: »

Question for those who have moved their mortgage to another bank....Do you need to provide all the same documentation to the new bank as you did when originally applying for mortgage? i.e 6 months bank statements, salary certs etc?

Yes, it's a brand new mortgage from the banks perspective.

Mortgage - low fee for breaking fixed rate

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