cost of changing from fixed loan to variable

Ive just sold my PPOR and the proceeds paid out a 3 year fixed loan 2 years early. Back in August the back advised that a break fee would apply to change from fixed to variable before settlement. I posted the reply back accepting their $700 fee. Upon settlement i find i'm slugged $2000 for the break fee! The bank advised that they didn't receive my original acceptance and that the new fee is applicable. Ive asked why the fee would have tripled - to which they replied "it varies, its calculated daily".

Given that there was only a month between the two values, so the monthly interest cycle would be about the same; the balance of the loan hadn't changed, and the interest rates hadn't changed; i'm at a loss to know why the fee would change so much. I'm petitioning the bank to have the original quote honoured, but it doesn't look promising.
 
As the CBA fact sheet suggests, the cost of breaking a fixed rate is highly dependent on the swap rate. This is not necessarily dependent on what the current variable or fixed rates are, it can be somewhat volatile. It's not exactly public information either.
 
Break fee's are calculated daily, cost involved has to do with the wholesale market swap rates.

Here is a link to CBA's Fact sheet, should apply to other banks.

https://www.commbank.com.au/content...stment-fact-sheet-and-calculation-example.pdf
The example given in the fact sheet shows when CBA makes a loss. What is the situation when CBA makes a gain - is it refunded to the borrower ? eg If I fix at 6% for 5 yrs, and after 2 yrs sell & repay the loan when the prevailing 3 yr rate is 4%..... would CBA refund 2% for 3 years ? (less a bit of admin fees of course).
 
I'm chiming in to confirm what others have said.

I broke a loan a while back and copped a $17k fee (ouch!) and had watched the market swap rate like a hawk.

The break fee was over $40k at one stage. Hope that makes you feel slightly better.
 
The example given in the fact sheet shows when CBA makes a loss. What is the situation when CBA makes a gain - is it refunded to the borrower ? eg If I fix at 6% for 5 yrs, and after 2 yrs sell & repay the loan when the prevailing 3 yr rate is 4%..... would CBA refund 2% for 3 years ? (less a bit of admin fees of course).

u know the answer to that :)

lenders used to pay economic break benefit to the borrower......... before the tighter regulations on break fees and exit fees came in


ta
rolf
 
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