Fixed loan - No break fee

So I always thought if fixed rates go down after you have fixed your home loan you need to pay break fees.

Turns out it’s not always the case.


Timeline of events:

21st September- fixed my loan with CBA for 1 year at 2.09%

15th October- CBA drops 1 year fixed loan by 0.1% to 1.99%

Today 21st October- I asked CBA though their virtual assistant ‘Ceba’ about refixing my loan at lower rate and whether I am up for break fees. Just wanted to do cost benefit analysis of paying break fees vs interest savings.

They said no break fees and lowered my fixed rate to advertised 1.99%

 

Break frees depend on the cost of funding to the bank, not necessarily the interest rate of the loan. The back end cost of funding hasn't changed in the last month, so the break costs likely wouldn't be any different either, despite CBA dropping the customer rate.

 

You didn't break your fixed rate loan, they just applied a lower rate.

 

Well I did break it.

they went “…are you ok with breaking and converting to variable at 2.xx%..” then once I said yes they said you can now fix at 1.99%.

 

Thats awesome
Pricing is so opaque here its hard to know, great share.

 

Wasn't clear in your original post, sometimes they can just apply the discount directly to the fixed rate if it was recently fixed in.