Breaking Fixed Mortgage – 3 Insider Tips

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Here’s Why You Should Break Your Fixed Rate Mortgage Now

If your fixed rate is due to run out in the next couple of years and you wait until the end of your fixed term it could cost you. 

That’s why we currently recommend you should consider breaking fixed mortgage rates and re-fixing.

Due to rising interest rates there is now a high chance that you will roll on to a much higher variable rate than today and have limited options to fix at a lower rate when you do.

Variable rates now are around 3.5% with the Central Bank lending to the banks at 0%. If the Central Bank goes to 2.5% or more in the next 2 years as the markets are predicting, the lenders will pass that on, meaning variable mortgage rates will rise to around 6%.

The average outstanding mortgage in Ireland is €200,000 and the average term people have left is 15 years. That makes the average mortgage repayment about €1,400 a month. So for the average customer a 2.5% increase is about €250 extra on their monthly repayment.

At the moment fixed rates start from 1.95%, but they are also on the rise and are unlikely to be as low by the time you come off your current fixed rate.

That’s why we are now advising anyone with less than two years left on their current fixed rate to look at switching and re-fixing on a long term low rate.

Don’t I have to Pay a Penalty Fee if I Switch in my Fixed Period? – Breaking Fixed Mortgage

You may think there are big penalties for switching before the end of your fixed rate period, but EU legislation introduced in 2016 has actually capped the amount banks can charge for breaking early. 

In most cases it is free or almost free to break early and under the same law banks now have to provide you with a calculation of the fee. 

You can then take this to a broker to see how much over the break fee you will save by breaking fixed mortgage now over staying in your fixed rate and risking future increases.

The actual calculation under the legislation (European Union Consumer Mortgage Credit Agreement Regulations 2016) is 

  • Break Fee = (Original Interbank Rate – Current Interbank Rate) X Remaining Time in Fixed Period X Remaining Value of Mortgage [1]

It seems that even if break fees could be applied under the calculation both Ulster and KBC are currently waiving all fees as we are yet to see a switcher get charged by either bank.

With interest rates rising and due to rise further the current Interbank rate will rise. This means any remaining fees are likely to fall completely away by the time anyone starting a switch now is fixing their new rate.

How Much Could I Save by Breaking and Re-fixing? – Breaking Fixed Mortgage

For example one customer completed their switch last week by breaking their fixed mortgage term. 

They were on KBC’s 2.6% 5 year fixed rate and saved €8,896 over the rest of their term. They had 1 year to run on their fixed rate and 15 years left on their remaining €200,000 mortgage.

 When they switched to Avant Money’s 2.4% 15 year fixed rate they reduced their monthly payments by €49 a month which is €8,896 over the rest of their mortgage. 

KBC charged no breakage fee, but most importantly by switching they have now guaranteed their repayments can not rise over €1,330 a month for the rest of their mortgage term.  

Mark Coan from said “The long term mortgage rates that are currently available could turn out to be today’s equivalent of the tracker.” 

“Being able to cap your repayments for the rest of your term is a no brainer for most and folks may look back with regret if they don’t jump on these deals while they are still out there.” 

“That’s why we are recommending breaking fixed mortgage rates right now”

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