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Getting out of my Fixed Rate...?!?!?!

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  • 13-11-2008 2:19am
    #1
    cul_irl
    Closed Accounts Posts: 119 ✭✭


    Hi Guys n' Gals,

    Took out a 3 year fixed rate mortgage 2 months ago at 6.19% with KBC (formerly IIB) for 35 years on 300k...monthly repayments are around €1700 before TRS.

    Nearly choked when I saw the rates coming down. Seriously considering changing over to a variable rate (think it's 5.49% at the minute). My lender has said the penaly will be 2.5k. I've heard that there are more interest rate cuts in the coming months. My question is - am I mad in paying the 2.5k and going onto the variable rate or should I grin and bear the fixed rate? And does anyone know how much I could save over the 3 years if I switched to the variable?

    Thanks,
    Cul :)


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    #2
    dotsman
    Registered Users Posts: 3,636 ✭✭✭dotsman


    cul_irl wrote: »
    Hi Guys n' Gals,

    Took out a 3 year fixed rate mortgage 2 months ago at 6.19% with KBC (formerly IIB) for 35 years on 300k...monthly repayments are around €1700 before TRS.

    Nearly choked when I saw the rates coming down. Seriously considering changing over to a variable rate (think it's 5.49% at the minute). My lender has said the penaly will be 2.5k. I've heard that there are more interest rate cuts in the coming months. My question is - am I mad in paying the 2.5k and going onto the variable rate or should I grin and bear the fixed rate? And does anyone know how much I could save over the 3 years if I switched to the variable?

    Thanks,
    Cul :)

    To be honest, it's hard to say ow much you would save as, although rates are going to come down more, exactly when and by how much would obviously greatly affect the figures!

    But, put it like this. AIB's current variable is 5%. Now take off the recent 0.5% which they said they would do, so it falls to 4.5%. Over the next year ECB rates drop 1.5% and 1% of this is passed on to the Variable rate customers. That sees you paying 3.5% That will see you repaying €1,250 per month. Obviously with those kind of repayments, you would definitely make back that €2,500 in no time.

    However, there is no guaranteeing that the ECB rates will fall or when. There's no predicting how much of them would be passed on to Variable rate customers. Nor is there any guarantee that rates wouldn't start rising again the year after!

    In short, it certainly looks like you would gain a lot. However, to see how much would involve sitting down in front of Excel for some time. Also note that the current fixed rate that your bank is offerning is used in calcualting your brekage cost. therefore, the longer you leave this, the more of a breakage fee you will likely pay. You will need to consult your mortgage terms and conditions (where you should see the calculation they use to determine the breakage fee).


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    #3
    Ogham
    Registered Users Posts: 1,844 ✭✭✭Ogham


    Switching to another lender may not be possible - they are not lending as easily now.


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    #4
    IsThatSo?
    Closed Accounts Posts: 988 ✭✭✭IsThatSo?


    Switching to another lender won't change the fact that you are breaking your fixed rate contract, but you might be able to use that threat to negotioate the fee. It could go against you, but if you offer to keep the business with them in return for a reduced fee you might succeed. After all they will get more in the long term if you keep the mortgage with them.


    If they refuse then you either see out the agreement or break it and pay the fee. Bear in mind that this is a contract and therefore a legal issue.


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