Regs: Dont assume that a break fee is straight forward. They really do differ between banks, so its worth asking them how it is calculated *before* signing for that new mortgage - especially if there is likely to be some volatility in the rate market.
I have seen one bank's formula for calculating its ERC's - and it is a very compex formula, even for people who understand such things, involving net present value/discounted cash flow calcs. And Regs is right - all banks use a somewhat different approach. The main bad point about all this is the customer cannot check the calculation of the fee themselves - way too complex, unless you use Excel or have calculator like an HP 12C that has built in functions, and even then beyond most of us.
Regs: At the same time a colleague who had a similar mortgage to me also considered breaking his fixed term. As it turned out his bank (w?) used a different ERA formula and it was going to cost him nearly 3 times as much as it cost me to break the term. For him it didnt make sense to break it. He also switched banks at the end of his mortgage.
Dont assume that a break fee is straight forward. They really do differ between banks, so its worth asking them how it is calculated *before* signing for that new mortgage - especially if there is likely to be some volatility in the rate market.
+1 Major plus one on this. Kiwibank were apparently very bad for this a while back, and Westpac were rough as well, from my own personal experience.
Just as a word of warning to any others (not the OP of this thread) if you can foresee a possible need to move house/change banks, then pay very close attention to how your bank calculates it's 'break fee'. Things like married, no kids, 2 incomes etc mean you should consider a smaller fixed period in case you have kids, and drop to one income in 2 or 3 years time etc!