How a fixed-rate break cost is calculated

2 min read

Funding lossLender compensation

Rate-dependentCan be zero or large

Ask for the figureBefore you exit

Amount (£)

Option A annual rate (%)

Option A term (months)

Option B annual rate (%)

Option B term (months)

Compares total cost and monthly payment of two offers side by side.

What a break cost compensates for

A break cost compensates the lender for the interest and funding arrangements it locked in for your fixed period. If it must reinvest your repaid capital at a lower rate than your fix, it loses out — and charges you for that.

Why it moves with market rates

The core driver is the rate differential between your fixed rate and current market rates for the remaining term. If rates have fallen, the break cost tends to be higher; if they have risen, it can be small or even nil.

The rough shape of the calculation

Broadly: remaining balance × (fixed rate − current comparable rate) × remaining years, discounted to today. It is an estimate of the lender’s loss, not a penalty, so it must be a fair figure.

Check before you commit to exiting

Always request the break cost in writing and net it off any refinancing saving. The calculator below helps you compare the alternatives.

Where Credicorp fits

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See indicative terms on business loans, or apply online in minutes.

See breakage cost and how to review a loan before the fixed rate ends.

Frequently asked questions

Can a break cost be zero?

Yes. If market rates have risen above your fixed rate, the lender may lose nothing by you repaying early, so the break cost can be small or nil. Always ask.

Is a break cost the same as an early-repayment charge?

Not quite. An early-repayment charge is often a flat percentage; a break cost varies with market rates and the lender’s funding loss. A loan may have one or the other.

How do I know if breaking is worth it?

Get the break cost in writing, add any new arrangement fee, and compare against the interest saved by refinancing. Only exit if the saving clearly wins.