Building savings contracts one-time interest rate changes, where is the catch?

I just spoke with our advisor from LBS. We secured our financing in March 2015 with 2 building savings contracts. Interest rate around 2.3%, which is currently cheaper, with LBS the interest rate for 300,000 euros would currently be around 2.5%.

Now the bank advisor told me my contract would allow a one-time interest rate change. LBS currently offers, if I were to change it, 1.6%. I think that sounds somehow too good to be true.

Where is the catch?

I suspect there are some fees again?

Term starts over?

I have an appointment next week to discuss it, but I would like to get information beforehand.

what does interest rate change mean? the repayment rate?

otherwise the LBS would be worse off. They would give you a better loan interest rate

The repayment rate is changeable, I knew that, but no, it’s about the loan interest rate. According to his statement, it is still so favorable for existing customers. That’s why yes, where is the catch.

can you maybe say something about that?

Thanks

I spoke earlier on the phone with our advisor from Lbs. We secured our financing in March 2015 with 2 building savings contracts. Interest about 2.3% which is currently cheaper, with Lbs currently about 2.5% interest would apply for 300,000 euros. Now the bank advisor told me my contract would allow a one-time interest rate change. Lbs currently offers 1.6% if I were to change it. I think that sounds somehow too good to be true. Where is the catch? I suspect there will be some fees again? Term start over again? I have an appointment next week to discuss, but would like to get information beforehand.

But it is possible, I did that back then too, but then did not use the building saver. An upfront fee definitely applies again.

I am not familiar with the contracts of LBS, nor am I a dedicated building savings expert. But just changing the interest rate while everything else remains the same is not something I know of.

I know two variants:

1. Building savings contract with different repayment options. There were contracts where you only decide on a variant at the start of the loan. In other words, either I choose repayment 1 with an effective interest rate of e.g. 1.6%, but higher repayment, meaning a shorter total term (e.g. 7 years), or repayment 2 with an effective interest rate of e.g. 2.3%, but lower repayment and thus longer term (e.g. 12 years).

or

2. Tariff change, meaning that you switch to another tariff, e.g. with more favorable loan conditions. This may mean a new upfront fee and usually a completely new calculation of the valuation number, etc. In other words, although you then have the more favorable tariff, the building savings contract may become allocation-ready much later with unchanged savings performance. Whether this makes sense then depends on the overall situation.

What I cannot imagine is that you are simply allowed to choose a cheaper interest rate just for goodwill :P

I knew that the repayment rate is changeable, but no, this is about the loan interest rate. According to his statement, this is still very favorable for existing customers. That's why I ask, where is the catch.

can you maybe say something about this?

Thanks

A change is basically always possible, you just have to take a closer look at the framework conditions...

As already explained, look more closely at the conditions.

Because it often looks like this:
lower interest rate = higher required savings = the customer must first save 50% of the building savings amount (building saver 300k, save 150k, 150k loan)
and also repay faster (6-7 years)
here the building society gets more capital for little money (0.10% credit interest or even 0.00%)

higher interest rate = less savings required = customer pays in only 30%, gets 70% loan (my example then 90k savings, 210k loan)
and then the customer can repay more slowly, i.e. 10-17 years
here the building society naturally earns significantly more, so why should they give that up.

Arguments for something like this?
due to the change there are new closing costs (because of the new contract) and the customer also has to pay in more (cheap capital) and repay faster (so the building society also gets the capital back faster)
often there are additional costs in the contract, such as "disagio" on the loan, i.e. another 2% when the customer uses the loan (which may not have been included in the old contract... if you then recalculate the 2% over 6-7 years, that already makes 0.28-0.33%; if you then again assume closing costs of 1-1.6%, we are rather at a markup of 0.43-0.60%, and then no longer at 1.60% but effectively at 2.03-2.20%; which is still cheaper, but if the customer has to repay the loan in 6-7 years instead of 10-17 years, it's quite a bit...)
and the customer pays disagio and closing costs in one lump sum, i.e. here a bigger chunk comes in as income initially... the 1.60% spread over 6-7 years then does not bother much)

Therefore, possible? YES
Better for the customer or the building society? you have to take a closer look at the conditions