I am writing on behalf of my daughter who currently has a five year fixed rate mortgage with KBC. The current fixed rate expires in April 2024.
My question is this: are you obliged under your current fixed rate agreement to transfer to the Bank of Ireland or can you choose another provider?
You have the opportunity to transfer to another provider that offers you a five-year fixed rate at a very competitive rate.
I feel that KBC is not fulfilling their end of the agreement as they no longer continue to provide you with a mortgage.
Do you also have to hire an attorney? They have contacted the Bank of Ireland and it seems they want to treat the transfer like a new mortgage and want appraisals etc which incur costs.
When is a fixed rate mortgage not a fixed rate? That really is the question of the day for thousands of homeowners who have fixed rate mortgages with KBC or Ulster Bank. With rates ultra-low for an extended period, locking in fixed rates has been a no-brainer for anyone without a tracking mortgage rate in the Irish market in recent years.
The deal was simple. He was locked into a fixed rate and was assured of knowing exactly what he would pay over the full term of the solution, from one to 30 years, depending on the mortgage provider and the term chosen by the customer.
But if there was certainty for the client, there was also certainty for the bank, which could count on a regular stream of income from mortgage rates which, although cheap by Irish historical standards, far exceeded the margin they could earn on average throughout the world. world. euro zone markets.
The only downside to fixed rates is the threat of a substantial “interruption fee” if you choose not to meet the full term you’ve set.
And that’s the conundrum that many KBC and Ulster Bank clients who are retiring find themselves in right now. And, as you say, the general feeling is that since the bank hasn’t lived up to its end of the bargain, it’s a bit rich of them to expect borrowers to do so. Of course, this is not entirely true. All fixed-rate customers will see those contracts fulfilled in full if they are defaulted as part of the settlement of the Belgian bank’s Irish operation.
The only real issue is the rate customers can expect to be offered when their current flat-rate period ends. People had many reasons for choosing KBC as their mortgage provider, but in recent years, one reason was that the lender was very competitive on mortgage rates. The same cannot necessarily be said of the Bank of Ireland, which is where KBC’s mortgage clients are likely to be found when the dust settles.
The good news is that I believe KBC is not enforcing the break fees allowed in their standard mortgage contract at this time.
The last time this issue came up on this page, several readers who are KBC mortgage customers got in touch. This is what one of them had to say.
“I, along with family members and colleagues, all have fixed-rate mortgages with KBC. It appears that they are currently not charging any interrupt rate fees, no matter what the remaining term is. I have six years to run and it is zero. A colleague who was quoted €14,000 a year or so to get out of his fixed interest rate was also quoted zero recently, as was my brother.
“We are currently re-mortgaging and our broker has confirmed that no KBC clients they are dealing with are now facing break fees.”
Now, it’s not something I’ve heard KBC formally announce, but it certainly sounds like if your daughter approaches the bank, she can likely break her fixed rate and move to the “very competitive” five-year rate. you say they are offering it elsewhere.
I am a bit confused by your reference to the Bank of Ireland and whether this is the lender offering your daughter this competitive rate or just some confusion as to what will happen as part of the massive transfer of loans from KBC to the rival bank.
Most of KBC’s mortgages will be moved to the Bank of Ireland by default. The borrower will incur no appraisal or other costs as part of this process. The loan is simply moved as part of a multimillion-dollar mortgage loan book and the mortgage is treated exactly the same as it is now, at least until the fixed-rate term ends.
You are not required to make the transfer to Bank of Ireland but if you choose not to, you will need to act before the transfer is made. Once your account is transferred to Bank of Ireland, it will most likely enforce any break fee clauses on a later early exit from the fixed rate before April 2024.
If it is changed in any other way than this ‘mass transfer’, including to the Bank of Ireland, then you may incur costs. It would be standard practice in a mortgage switch for the new provider to require an updated appraisal and there would also be legal issues in a switch that would require the modest involvement of an attorney.
The figures involved are not significant in the context of a mortgage, but will add up to a four-figure sum. This is true regardless of which lender you switch to outside of the mass policy transfer, including any decision you make to break out of your fixed rate and take advantage of any other Bank of Ireland rate.
So if she’s talking about breaking the KBC contract to proactively jump into the Bank of Ireland or anywhere else, then yes, there will be the above costs.
Please send inquiries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to [email protected]. This column is a reading service and is not intended to replace professional advice.