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Breaking fixed rates - how to calculate cost

Discussion in 'Property Finance' started by smallbuyer, 28th Jun, 2016.

  1. smallbuyer

    smallbuyer Well-Known Member

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    Hello,

    does anyone have any tips on ways to estimate what your break cost maybe without ringing up apart from the simplistic difference between current fixed rates and what you have? I know its based on a few things like bank bill swop rate or internetbank lending rates but does anyone know how to get decent daily data on these relevant rates? Its a bit annoying ringing the bank to check what it is.

    Cheers,

    Smallbuyer
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    You can't realistically calculate the difference. You need to call the bank and get the figure from them.
     
  3. smallbuyer

    smallbuyer Well-Known Member

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    Im only after a rough indication, like has it gone up or down in the last week :)
     
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    @smallbuyer we need to know which bank it's with to even begin to guess. If variable or fixed rates have reduced in the last week then it's likely your payout cost will increase.

    Even if there hasn't been a rate change, the underlying funding source may have changed which might adjust your payout cost. Only the lenders treasury will be able to comment on that.

    I agree it's very frustraiting. I wonder how difficult it would be to create an online calculator that would generate a figure. Probably easy to do a simple version, difficult to be consistantly accurate though.
     
  5. smallbuyer

    smallbuyer Well-Known Member

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    AMP, ive rung a few times to check and it seems to change 5-10% daily up or town, between today and yesterday price went up nearly 50%!! Very volitile
     
  6. smallbuyer

    smallbuyer Well-Known Member

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    anyone have a link to current bank bill swop rate or internetbank lending rates to help get an idea what the fixed break will be
     
  7. tobe

    tobe Well-Known Member

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    Do your loan docs reference either of these rates? most reference their own cost of funds rate (which they keep secret).
     
  8. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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  9. Scott No Mates

    Scott No Mates Well-Known Member

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    PV (Fixed interest rate on outstanding balance - Current cost of refinancing)
     
  10. smallbuyer

    smallbuyer Well-Known Member

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    They are vague about the calculation, they mention these rates but also other factors. Perhaps they just make it up when u call :)
     
  11. T-Trade

    T-Trade Member

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    CBA explains it in a fairly straightforward way.

    https://www.commbank.com.au/content...stment-fact-sheet-and-calculation-example.pdf

    You'll need access to a subscription service like Bloomberg to get historical data on swap rates I think. I used Bloomberg data when I was breaking a fixed term loan and came within $100 of the bank's calculation (which was 1% variance as break fee ~$10k). You may need to approximate if you're not in a 'quoted' BBSW timeframe (i.e. 1.2 yrs to end of loan, you'd use a mid-point of 12 and 15 month swap rates).
     
  12. smallbuyer

    smallbuyer Well-Known Member

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    thanks thats very handy, to bad you have to pay to get the historical swop rate :(