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fixed or variable rate mortgage?

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  • 03-01-2008 3:01pm
    #1
    telecaster
    Registered Users Posts: 528 ✭✭✭


    My first year fixed rate of 3.75% has now expired and I have the option of

    2 Year Fixed @ 5.29%
    3 Year Fixed @ 5.39%
    5 Year Fixed @ 5.53%

    or variable (currently 5.15%)

    any advice/insight would be appreciated - I do of course understand that it's not an exact science.


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    #2
    daveirl
    Closed Accounts Posts: 14,483 ✭✭✭✭daveirl


    This post has been deleted.


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    #3
    telecaster
    Registered Users Posts: 528 ✭✭✭telecaster


    Cheers Daveirl,

    What kind of fluctuations could be expected?...would it be feasible/unlikely/nigh impossible for the variable rate to rise above 6% in the next few years?


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    #4
    daveirl
    Closed Accounts Posts: 14,483 ✭✭✭✭daveirl


    This post has been deleted.


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    #5
    Ogham
    Registered Users Posts: 1,844 ✭✭✭Ogham


    Those options may be on offer from your current lender - but have you thought of moving to a new lender? A tracker mortgage may be your best option. The rates depend on the ratio of the loan to the value of your house - you could get rates as low as 4.5% if you owe only 50% of your house value.


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    #6
    paulksnn
    Closed Accounts Posts: 249 ✭✭paulksnn


    I'd have to go with Ogham on this one.

    A tracker mortgage with a new lender will likely yield a discounted tracker for a year or two, depending on LTV rates.
    Fixed is the banks best guess at variable rate averages for the next couple of years, presumably with a couple of points added for insurance.
    If you think the european and/or the worldwide economy is going to improve drastically in 3 years, (implying interest rate hikes), then go with fixed.
    Think about this though. Is the difference in repayments between fixed and variable going to save you money, if the variable rate goes above the fixed after half the fixed term.

    Myself, I ended up with a discounted tracker that's soon to become a normal tracker.


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    #7
    daveirl
    Closed Accounts Posts: 14,483 ✭✭✭✭daveirl


    This post has been deleted.


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    #8
    paulksnn
    Closed Accounts Posts: 249 ✭✭paulksnn


    With growth around europe/america so low, they can't raise interest rates without risking driving the economy into the ground


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    #9
    kenco
    Registered Users Posts: 1,080 ✭✭✭kenco


    General view at the mo is that interest rates (based on ECB) are unlikely to rise in the next 12 months (though they may rise after that). Some believe that they make actually fall but I personnally think that is unlikely.

    You could hedge on this a mix your mortgage, i.e. go 50% of it on varible and 50% on fixed.

    Also be aware that a variable rate may not be directly linked to the base ECB rate. Some lenders have recently increased their variable rates without a change in the base rate and the reason behind this is that the rate Banks lend to each other has gone up and therefore the margin on mortgage rates has lessoned. Due to the current credit crunch it is definately possible that variable rates may go up without the ECB rate going up

    Therefore if you are looking at a variable go for a tracker based on the ECB rate (normally ECB + .95%) and not a standard variable rate


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