breaking fixed rate

I''ve read through some of the posts here and am confused by the cost of breaking my fixed rate back to variable? My current fixed rates are around 4.8-4.95%, with 6 months and 18 months left respectively.

Just wondering whether it will cost me much to break them and move to variable rates. I note that the variable rates are slightly higher/the same for the products.

Some posts seem to indicate banks can only charge if theyre losing out or something...i'd never heard this before?
 
You best bet is to give you lender a call and ask them what the current cost is to break your fixed rate and move back to variable. You might be pleasantly surprised if your current fixed is lower than the variable.
 
Having come from a major bank Treasury I'm familiar with the maths. Its a bit fiddly. To make an accurate decision you can call the bank and ask for an estimate of the break costs. Should take minutes. Be VERY clear when you call it is just an estimate.

The amount will be affected by:
- the actual fixed rate
- The remaining term of the fixed rate loan
- The balance due
- The replacement rate (variable rate) v's the fixed rate; and
- The market rate of interest for the period to the fixed rate end date. This is used to "discount" the penalty to a present value.

Basically if the fixed rate is HIGHER than the variable rate a penalty may apply. As a quick rule of thumb deduct one from the other and use a simple compounding rate for the remaining fixed term. eg

Fixed 5%. Variable 4.8%. remaining term 18mths. Loan $100,000
Maybe $300...Some banks also waive the penalty if its under a certain value or you are a good customer. Some may also add a fee. Some will allow it to be incorporated into a new fixed rate too. (ie a new 5 year fixed loan)

In some cases the break cost can be a benefit (variable rate higher than fixed rate) but most banks dont pay it to you anymore as they (may) allow a extra $25kpa without penalties and that was the trade off the RBA agreed to many years back.
 
I''ve read through some of the posts here and am confused by the cost of breaking my fixed rate back to variable? My current fixed rates are around 4.8-4.95%, with 6 months and 18 months left respectively.

Just wondering whether it will cost me much to break them and move to variable rates. I note that the variable rates are slightly higher/the same for the products.

Some posts seem to indicate banks can only charge if theyre losing out or something...i'd never heard this before?

Hi,
I am with ANZ and I have approx 17 months left on 4.89 fixed loan my pay out is approx $600 per property at todays rates once my properties sell.
Macca446
 
A quick call to the lender asking for a quote on breaking the fixed rate will give you the answer. Do note that this break fee can change daily.
 
C Stewart im going through this situation atm... I have a property which is on a 3 yr io fixed rate of 4.99% im currently 6 prob closer to 7 months through the 3 years atm, I called up my bank manager and asked how much it would cost to break she told me nothing as the rate hadnt changed good news :D then she called me 2 hours later and told me its going to cost me $1644:confused: as over 6 months of the loan is expired and the break costs are now taken from the 2 yr fixed rate which there is a % difference. So I suggest speak to your branch manager
 
Some posts seem to indicate banks can only charge if theyre losing out or something...i'd never heard this before?

Hiya C stewart

As has been mentioned above - the only way to work out if it's viable or not is to give your lender a quick buzz to find out what the costs are.

From there, you can crunch the numbers to work out if it's viable or not.

Cheers

Jamie
 
I hi.

I paid a $17k break fee not long ago.

Best thing I ever did.

If u think the cost of education is expensive your should try the cost of ignorance - paraphrased From Jim Rohn.

Think or your mutiple of that 17 k you already have, AND the NPV of that 17 k in a cycle's time .......................

ta
rolf
 
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