Seabird

Get over yourself, c'mon tell me which viral genomic targets I should amplify for my current research proposal for forensic application - you can't - why not? Because it isn't something you have been told or learned about. Likewise I am not "whinging" just telling others who like myself were not told about this by anybody, including my broker, to be aware so that it potentially saves them thousands of dollars!

I have just had to go through a separation and this was money that was meant to keep myself and my daughter fed. We made next to nothing out of the house, as we only bought it a year ago and we have just lost a year's take-home salary, that isn't whinging it is heartbreaking for all of us.

I never celebrated getting a fixed rate, neither did anybody ever mention the pitfalls. There is no indication in my contract of how this value would be determined, and the broker certainly never pointed anything like this out to us - if they had we wouldn't have sold and probably would have rented the place out. I am not stupid, but you do not go looking for answers unless you have some reason to ask the question.

jayr

When entering into a fixed term the mortgagee is clearly hoping to "beat the bank" by interest rates being higher on average during the term than their fixed rate.

When this doesn't work out it seems quite reasonable that the bank should benefit, after all there is a contract between both parties.

For my part I believe that people employed by banks are likely to be much better informed than I am about the future direction of interest rates and exchange rates. I therefore choose not to bet against them.

A lot of companies are also poor at estimating these risks, there is a coal miner in QLD that has announced massive currency losses as they hedged the A$ at around US$1. Similarly, lots of airlines hedged oil prices at over $100/barrel and are feeling the pain now prices are well south of that.

Wendy

I got stung with it myself a few years back, I too had to sell a house - my Dad had left it to me and my siblings. That's how I know it's the same in the UK.

Have you spoken to the broker? or even reported them to the MIAA so that it doesn't happen to anyone else. http://www.properfinance.com.au/mort...r-industry.php.

Geelong Gent

You got yourself in the situation get yourself out. When you chose fixed you had the opportunity to choose variable.

If the exit charges are not in the contract they do not apply so its either or


Are you saying this is not a whinge?

MTPockets

Despite what everyone else has said I still think it sounds odd. I'mnot sure if you're saying the broker 'recommended' a fixed rate, but in the uk I'm fairly sure brokers/lenders are not allowed to ‘recommend’ anything (but I've never had a mortgage in Oz so don’t know the rules here). Admittedly you should have asked beforehand, but if it wasn’t explained to you at all and not in your contract that also strikes me as bizarre and worth arguing with. I still think some are missing the point that although we all know there are early repayment charges for fixed rates mortgages, to calculate the charge in the way you outlined in not the norm.

As to a ‘bet against the bank’, I wouldn’t feel too sorry for them. Having worked in banking I know they have a desk that trades this mortgage risk. So don’t think that just because you took out a mortgage at, say 8%, they’re also locked into that borrowing cost. They will have swapped it into variable rate in the interest rate swaps market months ago as rates began falling, have far cheaper general borrowing cost now anyway and can borrow using the governments AAA rating anyway. And of course they don’t give you money back if rates go up.

Rudi

I would fight it and fight it. The people who sold us our house were in the same postition as you. They were not buying a new house and were told they had $45k in exit fees. Eventually the bank agreed to waive the fee. I think they took it to an ombudsman of some sort.

Good luck

Rudi
x

jayr

I certianly don't fell sorry for the bank and understand that they will trade interest rates as a portfolio. The banks will inevitably do better than their customers and fixed rates have worked well (for the banks) by playing on people's fears. Once committed, the bank has every right to expect the customer to honour the contract however.

emelems

So basically it is down to how you were sold your product, not what you were sold I suppose?

Im pretty lucky as OH is pretty hot on these sorts of things and I remember him walking out on a few mortgage appointments as OH seemed to know more about the "small print" than the actual advisor... (I would see him get up, stride out of the room and me and the advisor would be sitting there gaping at each other! and then I would pick up my bag and toodle off after him, apologising profusely to the person!)

Oh... those were the days!

Em x

northernbird

Absolutely, our fixed rate documentation highlighted all charges we would be hit with if we terminated early. If it isn't in the contract then the OP should fight it. I know I would.

James516

Hey I'm a molecular biologist too, I can help with the genomic targets. I can also empathise with the mortgage issue - I got a 3 year fix at 8.89% in August - doh! But it's really up to you to check all the terms and conditions before you enter into the loan. Like others have said, you took a bet against the bank and lost. It happens. Doubly unlucky for you that circumstances dictated that you had to sell the house, but again that was no fault of the bank.

Wol

I think all it really means is that you can't beat the currency people and banks at their own game.

Rather akin to those who ask if it's better to keep their money in the UK "until the rate gets better". It may actually get worse.

I did reasonably well by locking in my UK pension remittals for 18 months four years ago and then went against my better judgement by being talked into another sx months at a rate which in the event was very poor. Overall I probably broke even - but I just take whatever rate's going each month now, good or bad. I have more time then to worry about other things!

MTPockets

I agree with you, but not if the charge method wasn't explained/not written into the contract. I also do not understand why the country has allowed the banks to impose fees of that kind - but admittedly that's a whole other issue.

Yep and I also think there's a serious lack of information for the average person as to considerations in transferring currency, take out financial products etc but . For example it's all very well looking at the fx rate, but respective savings rates, likely moves in the future, fees/taxation issues, infaltion rate erosion can more than eliminate any perceived benefit in the currency.

Brisben

[QUOTE=jayr;7268490]When entering into a fixed term the mortgagee is clearly hoping to "beat the bank" by interest rates being higher on average during the term than their fixed rate.

QUOTE]

Not the only reason - there is another reasons, the one above you mention and also so people can have a outgoing they know they can mantain and afford.

Especially so when you on the upper limits of your budget.

ABCDiamond

If the charge method wasn't written into the contract, then you do not have to pay.
However, some of the formulaes used need a degree to understand them, but that is why most contracts advise that you get financial advise before signing them.

How many of us read these contract fully only after we have signed them, and are looking for a way out ?

You ask why the country has allowed these fees... All countries allow banks to charge break cost fees on fixed rate loans.
If they weren't allowed to, the banks would just not offer these loans.

MTPockets

Yeah they don't make it easy - try searching the CBA website for info on early repayment charges - nada.

I know all countries have exit fees and that should always be a consideration, but I've seriously never heard of charges which seem to calculated on a (fixed rate - todays fixed rate) x remaining term of loan basis.

It's nonsensical as that makes it impossible for a borrower to really consider all possible forward costs (unlike a fee related to number of months, % of capital).

I'm also just generally referring to monthly mortgage fees, current account fees, fees to withdraw from another bank's ATM etc - a personal bugbear of mine.