Should You Break Your Fixed Mortgage? Break Fee Maths Explained

Why break fees exist

When you fix, the bank locks in matching funding for the term. Exit early after wholesale rates have fallen, and the bank re-lends your money at lower rates — the break fee recovers that shortfall. It's compensation, not a penalty for disloyalty; if wholesale rates have risen since you fixed, the break fee is often minimal or zero.

What drives the size of the fee

• Rate movement: the gap between the wholesale rate when you fixed and the wholesale rate now, for your remaining term. Bigger falls = bigger fees.
• Loan balance: the fee scales with the amount fixed.
• Time remaining: two years left hurts far more than four months left.

Note the driver is wholesale (swap) rates, not the advertised rates you see — which is why guessing your fee from bank websites doesn't work.

The only reliable number: your bank's quote

Every bank will quote your exact break cost on request, free of charge. Quotes are valid only briefly (often the same day) because wholesale markets move constantly. Get the quote in writing, then do the maths while it's fresh.

The break-even maths

If the 'for' column beats the 'against' column with margin to spare, breaking is rational. If it's close, the certainty of your current rate usually wins — forecasts are free, break fees aren't.

Situations where breaking gets considered

• Rates have fallen materially since you fixed a large balance for a long term.
• You're selling and the fixed term outlives the property (though banks can sometimes port loans).
• You need to restructure — divorce, business needs, debt consolidation — where flexibility is worth a known cost.

We run break-even calculations for clients at no cost, using your bank's actual quote. Roughly as often as not, the honest answer is 'don't break — but let's plan your refix properly instead'.

Frequently asked questions

How do I find out my exact break fee?

Ask your bank — they must quote it, it's free, and it's the only accurate number. Quotes expire fast because wholesale rates move daily.

Are break fees tax deductible?

For owner-occupiers, no. For investment properties, break costs may be deductible — confirm treatment with your accountant.

Can I avoid a break fee by moving my loan to the new house?

Sometimes — many banks let you 'port' a fixed loan to a new property at the same rate, subject to timing and approval. Ask before assuming you must break.

Why was my break fee $0?

If wholesale rates are at or above where they were when you fixed, the bank loses nothing by your exit — so there's little or nothing to recover.