Worth Closing Kaupthing Edge And Getting Penalty?

ChloeRadshaw

Hi All,

Just a quick question and i m suprised it has not been covered here

If you had 38K in a kaupthing edge fixed term which payed 7.16% for three years but you could break it and only get 6.16% interest (break rate) and then reinvest it in their three year term which payed 7.67% is this worthwhile?

I opened my account at end of Feb 2008 so can anyone help me please in working out how much better off I would be if I made this move please?

Any ideas?

Aegis

ChloeRadshaw wrote: »

Hi All,

Just a quick question and i m suprised it has not been covered here

If you had 38K in a kaupthing edge fixed term which payed 7.16% for three years but you could break it and only get 6.16% interest (break rate) and then reinvest it in their three year term which payed 7.67% is this worthwhile?

I opened my account at end of Feb 2008 so can anyone help me please in working out how much better off I would be if I made this move please?

Any ideas?

Assuming no fixed penalty or anything in addition to the reduced rate, the penalty for leaving the account now is more or less 5 months of 1% interest on the full balance, or £158.

The gains to be made are equal to 0.51% interest on the remainder of the term (for a like-for-like comparison), which comes to about £468.

Sounds like it might be better to break and get back in at the higher rate if you can do so with such a small penalty and are happy with the idea of being tied in for a further 3 years.

I'd check my figures though, and note that it's all been worked out using simple interest rather than compounded. However, the huge difference will probably not be significantly affected by that.

Lavendyr

To point out, the 7.67% on the 3-year term is GROSS, not AER - the AER is 7.15% which is exactly the same as the 1-year term. So don't do it - it's not going to gain you anything!

Lavendyr

http://www.kaupthingedge.co.uk/our-products/interest-rates.aspx

For reference - always look at the AER as well as the gross rate.

YorkshireBoy

Lavendyr wrote: »

To point out, the 7.67% on the 3-year term is GROSS, not AER - the AER is 7.15% which is exactly the same as the 1-year term. So don't do it - it's not going to gain you anything!

OP has a 3 year fixed term account now, so *is* comparing like-for-like because her account is paying 7.16 gross p.a. (6.70% AER).

Previous rates here: http://www.kaupthingedge.co.uk/our-products/interest-rates/history.aspx

I agree with Aegis; it's worth going for...providing there are no further penalties (other than the 1% 'break rate' already mentioned).

Lavendyr

oops......