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Breaking your fixed rate mortgage
Breaking a fixed interest rate loan is one of the hottest topics in the market right now. Although you can always break out of a fixed rate contract, it is important to understand the cost-benefit relationship of breaking a fixed rate.
Do the numbers before you break
Normally, customers want to break their fixed rate contracts to benefit from lower interest rates. In this situation, customers will generally pay a break fee to the lender. The break fee is (basically) the lender's lost profit opportunity. The calculation of the break fee is complex and our recent experience indicates that the costs often outweigh the benefits.
This is what you should do
Get a quote for the break fee from your bank first, and then run the numbers through our break cost calculator. This will tell you how many months it would take you to recover the break fees at a lower interest rate.
For more information, see the pages below.
- Breaking an ASB fixed rate loan
- Breaking your ASB Bank fixed rate loan could require you to reimburse ASB for costs incurred in breaking the fixed rate contract. Break costs typically include an administration fee or the lost profit opportunity related to your underlying fixed rate contract.
- Breaking an ANZ fixed rate loan
- You can break your ANZ Bank fixed rate loan. However, you may incur early repayment costs, or break costs. The break costs will depend on interest rate movements relative to ANZ's funding of your fixed rate contract. Break costs, if any, will be quoted by ANZ Bank and are valid for one day.
- Breaking a Westpac fixed rate loan
- You can break your Weatpac fixed rate loan. However, depending on the interest rate differential related to Westpac's funding of your loan, you may need to reimburse Westpac for costs incurred in breaking your loan contract.
- Breaking a Sovereign fixed rate loan
- You can break your Sovereign fixed rate loan, but you may need to reimburse Sovereign for costs incurred in breaking the loan contract.
- Breaking a National Bank fixed rate loan
- You can break your National Bank fixed rate loan, but you may need to reimburse National Bank for costs incurred in breaking the loan contract. Break costs typically relate to the lost profit opportunity that the bank has locked-in with your current fixed interest rate contract.
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Westpac Interest Rates Announcement 05-Jul-10
