Hi
Does anyone know where I can locate the current wholesale rate for the day?
I spoke to my bank about paying out a fixed loan and they can tell me the current wholesale rate for theday I took out the loan but not for today. I want to verify the break/exit fees they are charging me are correct.
Thanks,
NarelleThe wholesale rate is a vague defination and could be absolutely any rate.
Check out the RBA website and you will the official cash rate which is what your lender could be referring to.
Alternatively it could be another yard stick.Without knowing exactly what rate they are referring to it is difficult to answer further.
Richard Taylor | Australia's leading private lender
Hi Richard
Thanks for the idea. I was speaking to my bank this morning to payout on a car loan (as my partner and I are buying a home and want to be debt free when we buy it). The payout figure I got this month has actually increased since I got the payout figure a few months ago. I queried this and was informed how the payout is based on Wholesale market rates. I asked them what the wholesale market rate was back in 2007 when I took out the loan – which they gave me, then I asked for today's and they had no idea. They just said the computer worked it out. I queried this as I want to verify they were charging the correct amount. I was told to speak to my Accountant as they would know the rate and they said the wholesale market rate was the same for everyone.
So I thought I'd try to locate this 'mysterious' wholesale market rate. If it is the same for everyone I didn't think it would be too hard to find – but it seems it is.
I find it a little amusing the bank is asking me to payout a certain figure but will not tell me how they get to the figure – I'm supposed to trust their system and how they work it out. I think not!
It's been a good learning curve if nothing else. I had no idea about these wholesale rates.
I find it a little amusing the bank is asking me to payout a certain figure but will not tell me how they get to the figure – I'm supposed to trust their system and how they work it out. I think not!
Oh nothing suprises me.
Richard Taylor | Australia's leading private lender
ask if they are using the LIBOR rate for their wholesale rate
If yes then search on LIBOR in GoogleNarelle
Is it an actual bank or one of those mortgage managers like Yes Home Loans etc. The mortgage managers get the funds from a wholesaler and then ad their margin.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry
It's an actual bank. I did a few sums using the Reserve Banks Cash Rate (both when I took out the loan & todays rate) and I came pretty close to their payout figure, so I'm happy it's been calculated correctly. I just wanted to double check their workings for my own piece of mind.
Thanks for everyone's input on this. It was definately an interesting lesson to learn on break costs on fixed loans.
Cheers
Rellie wrote:HiDoes anyone know where I can locate the current wholesale rate for the day?
I spoke to my bank about paying out a fixed loan and they can tell me the current wholesale rate for theday I took out the loan but not for today. I want to verify the break/exit fees they are charging me are correct.
Thanks,
NarelleThe basis for the calculation will be in your loan contract. I'd suggest you start there.
As a guide, one common way to do it is:
*when you took out your fixed rate you wanted interest rate x% locked in for y years.
*essentially, your bank would have done the same. matching your funding requirements to their own.
*if you break your bit, they say, "hang on, we've locked away money at x% for y years and because interests rates are now down, there's no bloody way we can re-lend 'your' money for the remaining term to anyone else"
*so, they say "well, you've got so many years left on your loan…if we hadn't locked money away based on your requirements, we could lend your money to someone else for the remaining term, fixed at the current prevailing rate of z%"
*in other words, if there is one year left on your term, they will work out the difference between the rate you promised to pay and todays 1 year fixed rate, and that's the bill.
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