Break fee and charges are very sad.

[freezinhot]

Hi All

I wanted to share with you all what I had found out today from my bank.

I went in to see our banking consultant to break a loan we have to take advantage of the lower rates.

We have 3 months left till expiery, I was told we will be charged $1700 to break the term, thats fine by us in the bigger picture of things, but going into greater detail about the break fees, I uncovered that I was not in fact being charged for the 3 months remaing but 6 months.

The term pin drops comes to mind!!! I asked why they would do this and the reply was that the banks do not break the fee according to your remaining months but in 6 month instalments. I think this is just a total rip off.

As I said I dont mind paying what I owe, but why should I have to pay an extra 3 months on top, surely this is nothing short of robbery.

Any thoughts.

FH

[Rosco]

What a joke!! I can't believe banks can get away with things like this, and I really really hope that somehow you manage to get a fair deal. Like you say, a 3 month break fee is fine, but you shouldn't be charged for 6 months. If it was me, I try

1) Jump up and down, try and see the top person in the bank and really make a big song and dance of it. Maybe they give in?

2) Go to the bank ombudsman, surely what your bank is doing can't be legal?

Just curious, which bank are you with?

Good luck

Ross

[freezinhot]

Hi Rosco,

Yes have thought about going to the Bank Manager of the branch as the account managers below have there hands tied.

I won't mention the bank but it is one of the main ones.

Yes I could not believe what they were telling me, apparently all this information SHOULD have been given upon signing, but who can remember this. I guess its in the small print but still dont make it right!!

FH

[drelly]

Hi FH,

Why not mention the bank? I'd like to know!

[freezinhot]

Ok I guess there is no harm. National.

[dandan]

National!!, right, that does it, I'll grab some eggs from the fridge and drive down there now.

[Bob Kane]

It's tar and feathers, dandan, tar and feathers!

[SuperDad]

Are you certain they were charging 6 months worth of penalty payments (for want of a better name for the break fees), and not simply using the 6 month fixed rate to determine the differntial between current interest rates and your existing rate?

My bank (National) does the latter. If, to example, I have money fixed at 7.95% with 22 months remaining, they will take the closest term they offer (i.e., 24 months), and use the current rate they are offering for 24 months to calculate the brake fee. (Say the rate is 5.95% - they will use the 2% differential in their calculations.) But they won't calculate the break fee and charge me for 24 months worth of penalties, they will only charge for 22 months worth of penalties.

Hope that made sense.

Paul.

[freezinhot]

Hi Paul

Why would they use the 6 month rate. I am going to fix for 3 years so they are dropping from 9.4 to 5.99, nothing to do with a 6 month term.

FH

[drelly]

They use the rate for whatever is closest to your remaining term.

[Heg]

Hi FH
Why break now? Why not just wait 3 months? I've got two coming off in three months time and I'm convinced that the rates will be at the same low levels (if not lower) at that time.

Our break fee that we paid back in Dec was worked out like SD has said. The original loan was fixed for three years so they take the current 3 year rate and work out the difference in the % and multiply it by the term remaining, (which was 12 months in our case.)

[freezinhot]

Hi Jo

For us its 6 of 1 and half dozen of the other.

Loan is costing us 1248 per month now, if we break loan and refix at 5.99 it will cost us 865 per month, saving $383 per month.

This is a pretty big saving for us, 5.99 is not too bad and I wonder if it will get any better over the next 3 months.

We have 3 loans coming off fixed in the next 3 months and I dont want to miss the boat.

I know the RBNZ is announcing the OCR on the 12 March, so maybe I will wait until after then to refix.



FH

[Heg]

I know the RBNZ is announcing the OCR on the 12 March, so maybe I will wait until after then to refix.



FH

Hey Pat
Just be aware that if the rate drops your break fee may be higher... The banks have you by the short and curlies no matter what

[freezinhot]

Jo

Yes they do. Its so confusing at the moment at what we should fix at, either way we are in agreat position for cashflow. Its just knowing when to call it all in and not be greedy about doing it.

FH

[Rosco]

Hi FH
Why break now? Why not just wait 3 months? I've got two coming off in three months time and I'm convinced that the rates will be at the same low levels (if not lower) at that time.

I agree that rates in general will probably go down, but will the long term rates be as good?
I see 5 year rates getting to 5% or 5.5% in the next month or so.

I think in 3 months or 6 months you might get floating at close to 5%, and 6 month or 1 year at really low rates, but then when they come up for renewlal you are probably looking at a normal level of 7% +.
Also in 3 months or 6 months, I see the 2year, 3 year and 5 year all being a lot higher, as these rates reflex what the banks see happening over the long term.

So I see the next month or so as the best opportunity to get a good rate (ie below 6%) and keep it for a long period, hopefully 5 years.

Ross