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What is the difference between a fixed and variable rate?
A variable interest rate will offer you more flexibility in respect of your mortgage repayments and you will not be tied to a fixed rate. The mortgage interest rate may rise as well as fall, which can cause an increase or decrease in your monthly repayment.
A fixed rate will offer you certainty on what your monthly payments will be over a predetermined period. Your monthly repayment will remain the same even if interest rates go up or down. So if mortgage interest rates increase you will not pay anymore on a monthly basis, however if mortgage interest rates fall you will benefit from the lower rate.
You may incur fees if you wish to exit a fixed rate before the end of the term. This is explained in more detail below
Who can choose a fixed rate mortgage?
Our fixed rates are available to First Time Buyers, Movers, Switcher, Buy to Let customers and existing KBC customers. Existing KBC variable and fixed rate customers who are coming to the end of their fixed term will have the option to refix or go onto a variable rate.
What are my options?
You can choose to fix your rate for 1, 2, 3, 5 or 10 years. Our rates can vary depending on the loan to value of your mortgage.
You can make overpayments on your fixed rate mortgage of up to 10% of the balance of your mortgage at the time you fix your interest rate, if your mortgage balance is split into variable and fixed rates then it will be the balance on your fixed portion. If you exceed the 10% amount you may incur a break funding fee on the amount over 10% that you repay.
What if I want to change my rate during my fixed period or redeem my mortgage?
If you wish to change your rate to a variable rate or a lower fixed rate or want to redeem your mortgage before the fixed rate ends, a break funding fee may be applied. The fee will be calculated using this formula:
B = (W - M) x T / 365 x A, where:
B = the break funding fee.
W* = the Fixing Rate at the date you fixed your mortgage.
M** = the Fixing Rate at the date you wish to break out/redeem.
T = the period of time from which you wish to break out/redeem your mortgage to the end of the fixed rate period.
A = the balance of your mortgage.
* The Fixing Rate (W) means the market interest rate applicable at the start of the fixed interest rate term, for the duration of the fixed rate period.
** The Fixing Rate (M) means the market interest rate applicable at the time of the early repayment or conversion, for the unexpired fixed interest rate term. The rate applied is based on the remaining fixed rate term of the mortgage.
What is the Cost of Funds?
To have funds available to lend, KBC must first raise these funds from sources such as deposits, borrowing funds from other entities or other third parties.
We have set out 2 examples of break funding calculations below for illustrative purposes:
Loan Amount = €200,000
1. Where Fixing Rate increases over the term of loan:
Fixing Rate at the date the existing fixed interest rate applying to the loan was set (W) = 1%
Fixing Rate at switching/redemption date (M) = 2%
Total Break funding fee = €0
Break funding fee = (1%-2%) x 365 / 365 x 1,000 = €0 per €1,000.00
Break funding fee (per €1,000 loan amount) = €0
Outstanding Loan Amount = €200,000
Total break funding fee = €0 x (€200,000 / €1,000) = €0
2. Where Fixing Rate decreases over term of loan:
Fixing Rate at date the existing fixed interest rate applying to the loan was set (W) = 2%
Fixing Rate at switching/redemption date (M) = 1%
Break funding rate = 1%
Unexpired Fixed Rate Period (T) = 365 days
Break funding fee = (2%-1%) x 365 / 365 x 1,000 = €10.00 per €1,000.00
Break funding fee (per €1,000 loan amount) = €10.00
Outstanding Loan Amount = €200,000
Total break funding fee = €10 x (€200,000 / €1,000) = €2,000
What happens at the end of my fixed rate period?
We will write to you before your fixed period ends, you can choose one of the following options:
Roll onto the prevailing new business LTV variable rate type as set out in your original loan agreement; or
Avail of our Existing Customer Rate Offer, please visit www.kbc.ie/our-products/mortgages/existing-customers for more information.
With a variable rate, your monthly repayments may rise or fall from time to time. If the variable rates fall your monthly repayment reduces, while if variable rates rise, your monthly repayment increases. Variable rates can be increased or reduced at the discretion of the lender.
When you have a variable rate, you benefit from lower monthly repayments as a result of any reductions which may apply to variable rates and if you decide to redeem your mortgage you will not be charged a break funding fee. The disadvantage of a variable rate can be that your rate and monthly repayment may increase and as a result you do not know exactly how much your monthly mortgage repayment will be, which makes budgeting your finances more difficult.
With a tracker rate, your monthly repayments may rise or fall from time to time. If the tracker rates fall your monthly repayment reduces, while if tracker rates rise, your monthly repayment increases. Tracker rates increase or reduce in line with increases and reductions in the European Central Bank ('ECB') base rate.
When you have a tracker rate, you benefit from lower monthly repayments as a result of any reductions which may apply to tracker rates and if you decide to redeem your mortgage you will not be charged a break funding fee. You will also benefit from the certainty that your rate will be maintained at a constant margin above the ECB base rate. The disadvantage of a tracker rate can be that your rate and monthly repayment may increase and as a result you do not know exactly how much your monthly mortgage repayment will be, which makes budgeting your finances more difficult. This section applies to existing customers currently availing of a Tracker Rate. Tracker Rates are no longer provided as part of the KBC Interest rate offering’.
You may choose to set a part of your mortgage at a fixed rate and the remainder at a variable/tracker rate. If variable/tracker interest rates are reduced, your repayments on the variable/tracker part of your mortgage will reduce, while if variable/tracker rates rise you have the security of knowing that only the payment on the variable/tracker portion of the loan will increase.