A fixed-rate loan provides you with a guaranteed interest rate for a set period. This gives you certainty over your repayments, but if you choose to repay all or part of the loan before the end of the fixed term, you may incur a Breakage Cost.
The Breakage Cost is a percentage of the amount you repay linked to the number of years left on the fixed rate. This charge is intended to compensate us for the reasonable costs we incur as a result of your early repayment, including the cost of unwinding the fixed-rate funding we arranged for your loan.
To ensure costs are clear, predictable and easy to understand, we calculate the Breakage Cost using a stepped percentage model based on:
- The amount you repay early.
- The number of years remaining on your fixed-rate term.
A fixed percentage is then applied per remaining year, as shown in the table below:
Year of the loan that you are in when you are making your repayment |
1st |
2nd |
3rd |
4th |
5th |
|---|---|---|---|---|---|
% payable on the amount of the repayment |
5% |
4% |
3% |
2% |
1% |
Example:
You have a 5-year fixed-rate loan of £500,000. You are in Year 2 and want to repay £250,000.
Breakage Cost for Year 2: 4%.
Chargeable amount: £250,000.
Breakage Cost = 4% × £250,000 = £10,000.