Time of switch to fixed rate mortgage

masterK

Trichet signals pre-Christmas rates rise

'After two and a half years of maintaining interest rates at a level historically exceptionally low, I would consider that the Governing Council is ready to take a decision to move interest rates.' Those were the words of European Central Bank president Jean-Claude Trichet today in Frankfurt at the European Banking Congress. He was giving the strongest indication yet that interest rates are set to rise when the council next meets on December 1. Euro zone interest rates have been at 2% since June 2003 and any rise would be the first in five years in Ireland. Trichet said the council would 'moderately augment the present level of rates'.

It's looking like a good time for those of us on variable rate mortgages to switch to fixed rate as it looks certain interest rates will be on the rise in the very near future. I'm trying to get mine changed in time for the December 1st meeting of the ECB council. With most institutions the 3 year fixed rate is the same as the variable rate.

samo

I rang PTSB about our motgage today as currently on the standard variable rate - to fix it for 2 years added approx 60euro p/m to a 30 year term for 180k so debating if its a good option or not.

They also wanted 100 euro admin fee to change from variable to fixed ....anyone know if this is fairly standard?

masterK

That seems a bit excessive. I have my mortgage through BOI and called them, they are sending me out a form to sign to confirm the change from variable to fixed rate, they never mentioned anything about an admin fee and their 3 year fixed rate is currently the same as their variable rate.

daveg

I wouldn't jump too fast. Havn't the central bank come out to say this is a one off 1/4 % increase?

masterK

They did say that, however they have no way of being certain of that, much will depend on oil prices and inflation within the Euro zone.

Most economists seem to thing interest rates will be between .75% and 1% higher this time next year. Here's a article from yesterdays Indo.

Fix your mortgage rate now or miss big savings
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Bill Tyson

Personal Finance Editor

BORROWERS can save more than €1,300 a year by grabbing a final chance to fix their home loans at the low rates still offered by a handful of banks.

Economists described the move as a 'no brainer' and mortgage advisers have been pleading with clients to avail of some fixed offers which will be withdrawn as early as tomorrow.

Most lenders have already sharply increased fixed rates by around 0.5pc after the European Central Bank clearly signalled that the cost of money is going up.

But NIB, AIB, Bank of Ireland, ICS and First Active have yet to move and still offer three-year rates at around the same cost as some variable deals.

"This is a no-brainer. It is a very rare window of opportunity," said Jim Power, economist with the Friends First investment company."

Asked if he would fix his own mortgage, Mr Power replied: "I already have."

New hikes

Mr Power warned the window "will soon close" and this was borne out by one major bank which signalled yesterday that a new round of fixed rate hikes would be announced tomorrow.

Others will soon follow. Mr Power predicted general rate rises of 0.75pc by the end of next year after which further hikes could be on the way depending on the performance of the European economy.

An increase of 0.75pc would shove the average variable rate up to around 4.2pc - or 0.7pc above the lowest fixed rates currently on offer.

That means borrowers who fix now could save €113.40 per month on a €150,000 homeloan or €1,360.80 a year by the end of 2006 - with further savings likely.

Pleading

Michael Dowling, president of the Independent Mortgage Advisers Federation, said he has been "pleading" with clients to avail of the low fixed-rate deals.

"I'm surprised they haven't gone up already . . . But there isn't much time. Today or tomorrow is the time to do it," he said.

He advised borrowers with the five banks in question to e-mail or fax in a request to fix their mortgage and insist on a receipt in writing.

"Some lenders might be sticky (about honouring the rates currently offered) if borrowers haven't signed forms in time," he said. "But if you have it writing, they will have no option."

However, new borrowers and those who want to switch from another lender will almost certainly miss out as they don't have enough time to set up a mortgage before the remaining low fixed rates are likely to go up.

Economist Alan McQuaid of Bloxham Stockbrokers predicts a rate rise of 0.5pc in the next year.

"Fixed rates are good value at 3.5pc, but I wouldn't rush in to take the ones that have already gone up," he said.