Why do Bank Staff ring you with good Interest Rate offer then don't waive early termination interest

So, NAB rang last week to offer me a 3.88% fixed interest rate for 2 years offer for my 2 properties, so I agreed to it today, then the home lending girl said I would have to pay out the remaining interest on the loan as there's still 1 month to go.

Why bother ringing me to offer me this "good offer" and wanting me to lock in for another 2 years, and then say I have to pay out interest for the remainder of the fixed period - stupid IMO!

I mean when Telstra rings me to get me to sign up for another phone plan contract, they waive the existing contract period left and sign me up. Why can't the bank do this also???

 

Some people might think locking in 3.88% now is worth the cost.
And those that don't would then just wait the month out.

 

Not as silly as it seems. The 3.88% 2 year fixed is a limit time offer. There are no guarantees that it will still be available in one month when you current fixed rate expires. Depending on how much you owe and a whole host of other variables this could/could not be the best way forward.

Probably another reason why having a broker is important especially for investors. A good broker would have explained this to you and also given you alternatives if available.

 

I have a broker.

 

This, basically

 

Is it the interest remaining? Or a break fee?
If breaking a fixed loan, 1month before expiry, I would think the cost would be very minimal.
I'm not sure the bank can legally charge you for interest you don't incur.

How much did she say the. It's would be?

 

The figure you would need to pay is a break fee - which would be the difference in funding costs between their current variable costs vs the cost of the fixed rate that you locked in at the time. Blacky is right - overall it should be peanuts in comparison to the effective saving you should make from the new fixed rate. (the fact there's a break fee shows there's a saving variance if the new cost of funding is going to be cheaper).

Lenders call up their customers like this to try retain their customer base so you're not persuaded to move elsewhere - they're offering something with a net benefit to you, take it for what you will.

 

I imagine the break fee would be next to nothing. Most lenders also charge a processing fee for breaking a fixed rate loan early, it doesn't matter if it's a year or a month before it expires.

 

Wondering if the interest they wanted was simply the interest accrued for the month to that date. That is what I was asked to pay when I fixed for the 2 year rate. Then the P&I payment wouldn't be due till next month. Just a thought.

 

Get them involved - hit them up for some advice on what's going to be best for you going forward.

Cheers

Jamie