Home loan T&Cs, fees & default interest changes - 5 November 2024

Rather than using the calculation in the Credit Contracts and Consumer Finance Regulations 2004, we use our own mathematical formula. This formula is complex, but it takes into account the following to see if an early repayment fee is to be charged, and if so, how much.   

 What’s considered  

• The amount being repaid early, including any additional repayment allowance remaining.  
• The wholesale interest rate* at the start of your fixed rate term.  
• The relevant wholesale interest rate* at the date of your early repayment, for a period equal to the time remaining in your fixed rate term.  
• What your current regular payments are.  
• We adjust the wholesale interest rate* to reflect certain characteristics of your loan.  

 What we compare  

• We calculate the interest charges and your scheduled regular payments that would have been made over the time remaining in the fixed rate term, using the wholesale interest rate* that applied at the start of your fixed rate term (the first amount) and, 
• We calculate the interest charges and your scheduled regular payments due from the date of your early repayment to the end of your fixed rate term, using the wholesale interest rate* that would apply for the time remaining in your fixed rate term (the second amount).  

We adjust both amounts to recognise that we will receive the payment now, instead of over the term of the home loan.  

If the first amount is larger than the second amount, that means we expect that your early repayment will cause a loss to us and an Early Repayment fee will be charged.   

They way we calculate the fee can be expressed (in a simplified way) as: 

Early repayment fee = Amount you wish to repay * interest rate differential * remaining fixed rate term. 

* Wholesale interest rates are wholesale interest swap rates determined using relevant market information. When we determine the applicable rates, we use the most recently available market rate we have on the relevant day.  

Full repayment example 

Your home loan is on a two-year fixed rate contract with us, and after six months, you choose to repay the entire loan balance, currently $100,000, leaving 18 months of your fixed rate term remaining. You have already made $10,000 in additional payments, so any Early Repayment fee is calculated on the full repayment amount of $100,000. 

At the time you fixed your loan, the wholesale interest rate for a two-year fixed rate was 5.00% p.a., however the current wholesale interest rate for the remaining fixed rate term (18 months) is 4.50% p.a. As the first amount is larger than the second amount, that means we expect that your early repayment will cause a loss to us and an Early Repayment fee will be charged. 

So as an approximate calculation, we take the amount you wish to repay and multiply that by the interest rate differential, times the remaining fixed rate term. This is a simplified example and hasn’t been adjusted to consider what your current regular payments are or to recognise that we will receive the payment now, instead of over the term of the loan.  

Early repayment fee = $100,000 * 0.50% p.a. * 18 months = approximately $750  

Partial repayment example 

Your home loan is $250,000 on a two-year fixed rate, and after one year and six months, you choose to repay $50,000 on that loan, leaving six months remaining on your fixed rate term. Because you have not made any additional payments in this calendar year, the $10,000 permitted in additional payment applies, and any Early Repayment fee is calculated on the remaining repayment amount of $40,000. 

At the time you fixed your loan, the wholesale interest rate for a two-year fixed rate was 5.00% p.a., however the current wholesale interest rate for the remaining fixed rate term (six months) is 4.50% p.a. As the first amount is larger than the second amount, that means we expect that your early repayment will cause a loss to us and an Early Repayment fee will be charged.  

So as an approximate calculation, we take the amount you wish to repay and multiply that by the interest rate differential, times the remaining fixed rate term. This is a simplified example and hasn’t been adjusted to consider what your current regular payments are or to recognise that we will receive the payment now, instead of over the term of the loan.  

Early repayment fee = $40,000 ($50,000 less the $10,000) * 0.50% p.a. * 6 months = approximately $100  

The below table provides simplified examples of the potential early repayment fee for a $100,000 early repayment, for different rates and terms. We’ve used a $250,000 loan making weekly payments of $400 and have assumed that they have not made any additional payments within the calendar year. 

Please note: The explanation and examples above are simplified and the actual Early Repayment fee calculation is complex. The result of the calculation depends on the specific features and terms of your home loan — it will not be the same for everyone and will change each day. We recommend you ask us for a quote before you look to repay (either partly or in full) or restructure your fixed rate loan.  

We’re changing our early repayment fee methodology, moving from a calculation using retail interest rates, to a method based on wholesale interest rates. This provides a more accurate estimate of the likely loss to us (if any), when you break or repay your fixed rate home loan early. It also provides a more consistent calculation method for all our customers. 

There are many variables that make up an early repayment fee, including the amount being repaid, your current repayments, changes in wholesale interest rates, and the time left on your fixed rate term.  

For some customers, this change may result in a higher fee, but for others, this change may result in a lower fee.  

We recommend you always contact us for a quote before you look to repay (either partly or in full) or restructure your fixed rate loan.  

Calculating the early repayment fee is a complex calculation and is not the same for everyone. A description of how the fee is calculated, along with an early repayment example is shown above. We recommend you contact us for a quote before you look to repay (either partly or in full) or restructure your fixed rate loan.  

There are ways you can avoid paying an early repayment fee on your fixed rate loan. These include:  

• You can make additional payments up to $10,000 per calendar year above your regular payments, without an early repayment fee applying (this is the additional repayment allowance). 
• You can increase your regular payment amount up to three times over your fixed rate term. The total change in payment amount cannot be more than $1,000 per month above the amount of your actual payment at the beginning of your fixed rate term.