Should I break my fixed rate term to lock in a new rate?
If you choose to exit your fixed rate agreement before the end of your term, which is called a ‘break event’ (create a break event) then an Early Repayment Adjustment may be payable which can be costly, especially if you have a lot of your term left.
A break event is defined as any of the following:
- Where you repay the loan in full.
- Where you have paid more than $10,000 over your minimum repayments during a 12-month period.
- Where you want to change the fixed term of your loan or move your loan to a variable rate.
We calculate the adjustment using a formula which includes:
- What the balance of your loan would have been over the remainder of the fixed period had you made your normal repayments, compared to what it will be after the break event;
- Published wholesale interest swap rates1 for relevant terms, when the fixed period started and when the break event occurs; and
- The loss would accrue over the fixed period, and a discount is applied to determine the present value of the loss.
Before you decide to exit your fixed rate term, it’s a good idea to request a break cost quote to determine if it’s worth paying break fees. You can do this by sending us a message via Secure Mail in Internet Banking or by calling us on (08) 8202 7777 from 8am-8pm Monday to Friday, or 8am-2pm on Saturdays.