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EU directive re breaking fixed term contracts

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  • 26-07-2018 11:07am
    #1
    Sammy2012
    Registered Users Posts: 1,244 ✭✭✭


    Just wondering if anyone can tell me anything about this. We fixed our mortgage with ebs for 4.85% for 10yrs just over 8 years ago. Fixed term is up in April 2020. Yes we took a gamble and it didn't pay off but have read that the EU issued a directive just before Christmas stating that banks had to allow borrowers to break from their fixed contracts for a nominal fee. I enquired about this with ebs but they told me it would 10k to break out of our contract.

    We owe around 100k on our mortgage and have LTV of less than 50% so are in a good position financially but I don't want to miss out on the cheap rates that are being offered by banks at the moment. I'm afraid rates will start to rise before our fixed term is up.

    I'm just wondering if anyone could tell me would i have a case to put forward to the financial regulator? Can the bank just ignore these directives?


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    #2
    Xterminator
    Registered Users Posts: 4,738 ✭✭✭Xterminator


    Can i ask if they were losing money on the deal because interest rates hit 6% would you accept they could break the contract for a nominal fee and charge you the higher rate?

    Of course not.

    have the bank provided you with a written breakage quote explaining how the 10k figure was reached?

    The bank is allowed to charge a breakage free where the rates at which banks lend to each other have fallen since you fixed. The written breakdown should explain to you what the cost breakdown is & any assumptions they are making etc.


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    #3
    markpb
    Registered Users Posts: 9,309 ✭✭✭markpb


    This article should explain the new legislation. It doesn't allow you to break for a nominal fee, it limits what the bank can charge you. They used to charge six months interest but now the charge is capped based on the change of EURIBOR interest rates. If the rates rose since you took out your mortgage, they can easily loan the money to someone else and not make a loss on you. If the rates fell, they won't make as much money loaning it to someone else so you have to pay the difference.


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    #4
    hanaimai
    Registered Users Posts: 207 ✭✭hanaimai


    These new rules were introduced in March 2016 and they limit the amount the banks can charge you for breaking out of a fixed term contract. It seems the rules only apply to contracts entered into after March 2016 - this might be why you are still being quoted a large fee?


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