Every loan is different but here’s how most lenders work out how much to charge. They look at the loan amount, and then calculate the difference between the interest they would receive and current market rate. Then they apply this over the remaining term of the loan.
If your fixed rate still has years to run and interest rates have dropped, the bank will miss out on a lot of revenue. So the break fee will be high.
But as a borrower, you will also make huge savings from refinancing in these conditions. So it may still be worth breaking your current fix.
The other thing to keep in mind is that many lenders will cover the cost of your old bank’s break fee if you bring your lending to them. As mortgage brokers, Float can go to the market and negotiate the best deal for you.
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