Bank’s say they use a ‘swap rate’ when calculating early repayment interest & fees on breaking or repaying a fixed rate home loan. Where is this information available for current/rates & historically?
Fixed Rate Home Loans Early Repayment
Comments
Oh that's cool, three years' worth of info there.
You will never be able to replicate the Banks' convoluted calculation method for early payment or break fees.
And even if you do and it differs wildly from the Bank, are you going to convince them you are right and they are wrong?
Simply ask them what the fee will be and decide for yourself if you want to go down that path, it is more straight forward and less hassle.
I asked for information on how the break fee would be calculated before I signed a fixed rate and the lender was gobsmacked that I should ask, and was unable to provide a formula with authority, just “this is kind of how it is calculated “. Ridiculous.
I was told by ANZ a few years ago that they would put it into their portal/tool and give me a figure, but that was essentially only the correct number for that exact point in time and it could go up or down by the time you got around to paying it out early/breaking the fixed rate period.
Here is St George's explanation - Page 2 - How Are Break Costs Calculated?
https://www.stgeorge.com.au/content/dam/stg/downloads/person…No-one can calculate your break costs in advance of the day that you break because rates can change in the background. So while banks can tell you HOW they will calculate it, they can't tell you what it will be (if any) until the time comes. You can ask the bank for the applicable wholesale rates and the equation used to calculate.
They used to publish the actual equation used but it was all Greek symbols and a bit beyond me!
Rule of thumb, though; if the current variable is lower than your fixed rate, it's going to bite. But if you fixed at say 5% and variable is now 9% you should be sweet; bank will be only too happy to get that money back from you and lend it to someone else at a much higher rate, and there won't be a loss to the bank so no cost to pass on to you.
https://www.yieldreport.com.au/category/bank-billswaps/weekl…