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OCR - going down

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ssweetpea
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« on: January 29, 2009, 07:24:37 am »

It has been dropped another 150 points to 3.5% instead of the 75 - 100 points many were predicting.

Hold on folks, this ride could get bumpy.
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ssweetpea
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« Reply #1 on: January 30, 2009, 06:00:08 pm »

For anybody who is interested this is the formula for calculating break costs from Kiwibank.

Loan balance x (wholesale interest rate for orignal fixed rate on drawndown - wholesale interest rate for the remaining fixed term) x (number of days to orignal rate maturity/365)

OR

Loan balance x (retail interest rate for orignal fixed rate on drawndown - retail interest rate for the remaining fixed term) x (number of days to orignal rate maturity/365)

Which every sum is the greater is the break cost.

If I plug some figures in say for a $100,000 mortgage with 6 months (181 days) with a current fixed rate of 9% (two years) moving to a new rate with the same bank of 6% for 6 months to run I get:

100000 * (9%-6%) *(181/365)
100000 * 3 * 0.49589 = 6049.72 and since that is twice the figure I get if there is one year remaining I have got my sums wrong - I hope.


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