PWLB break costs — mechanics & live calculator
About this course
Build intuition for the DMO premature-repayment formula from annuity-factor first principles, then run a validated calculator against ~16,000 real PWLB loans across every UK borrower. Pick your council, pick a loan, see today's break cost and its 12-month trajectory against the actual gilt curve.
What you'll learn
- What break cost is
- Annuity factor
- Decomposing a loan
- DMO conventions
- Live calculator
Part of these pathways
Related courses
- PWLB explained
- PWLB repayment structures
- Debt restructuring
- Strategic PWLB borrowing
- Reading the PWLBpredict
- Reading PWLB activity
Common questions
What is 182.5 (fixed half-year)?
The fixed denominator used in the premium calculation, regardless of how many days are actually in the current coupon period. A subtle but critical convention — many naïve implementations get this wrong by using Hy in both places.
What is Accrued interest?
Interest earned by the lender between the last coupon payment and today, but not yet paid. Included in the YEV because the borrower owes it on early repayment.
What is Annuity factor?
The ratio A = r / (1 - (1+r)^-N) that converts a present value into a level periodic payment over N periods at rate r. For an annuity that pays £1 per period, the present value is 1/A. The single most-used factor in fixed-income mathematics — and the engine of the PWLB break-cost formula.
What is ANNUITY profile?
Equal total payments: each period the borrower pays the same total amount, with the split between interest and principal shifting over time. Lower interest portion in later periods. Common for HRA loans matching residential rent profiles.
What is Banker's rounding?
Round-half-to-even rule used by the DMO. JavaScript's Math.round does round-half-away-from-zero — different in 1 in ~50 cases at the rounding boundary, producing 1p drift on a small percentage of trades.
What is Break cost?
The £ amount owed (or received) when a fixed-rate PWLB loan is repaid before its contractual maturity. Calculated by the DMO using a precise formula that compares the loan's remaining cash flows against today's market rate for an equivalent loan.