Early repayment penalties at LBBW fall to almost zero

2023-08-29 11:50:30

It is a consequence of the rapid turnaround in interest rates in Europe: At the Landesbank Baden-Württemberg (LBBW), prepayment penalties in the lending business have been significantly reduced and have now almost completely disappeared into thin air.

“The higher interest rates meant that fewer loans were repaid prematurely, so that the prepayment penalties were reduced to almost zero million euros,” writes the Landesbank in its semi-annual report that has now been published. LBBW had already presented key figures for the first six months at the beginning of August. For the first half of this year, LBBW reports a total volume of prepayment penalties of around EUR 1 million in the report, compared with EUR 17 million in the first half of 2022 and EUR 45 million in the first half of 2021.

Borrowers can repay loans early under certain circumstances, but often have to pay the financial institutions a so-called prepayment penalty for the omission of the planned interest payments. Some financial institutions may refrain from doing so if the new loan remains in their own home. However, the rapid rise in interest rates has made new loans significantly more expensive for borrowers. Debt restructuring is therefore often no longer worthwhile. This phenomenon should therefore also be observed in other financial institutions.

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However, many borrowers have contractually agreed that they may be able to reduce their loan unscheduled once or even several times during the term by paying special repayments (e.g. from inheritance or Christmas bonuses). At least financing experts recommend such contract components in order to be able to make the burdens more flexible. For many people, such a property is the biggest investment of their life.

What many people don’t know: After the period of ten years has expired, even if a mortgage loan has a longer fixed-interest period with a notice period of six months, an extraordinary termination of the entire loan or just part of it is legally possible at any time without incurring a prepayment penalty.