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Tracker vs Fixed interest only

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  • 31-03-2008 5:52pm
    #1
    blahblah06
    Registered Users Posts: 4,306 ✭✭✭


    Hi guys looking to change my interest rate at the minute. It is a fixed interest only rate at 5.35 % needless to say im sick of paying interest only.
    I have been offered a rate of 4.95 % Tracker and I dont know what the difference is.
    The mortgage is 318000 so will I save any money at all ?

    Thank You


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    #2
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    The tracker rate will normally track the ECB marginal base rate at a fixed percentage above the rate- i.e. at 4% now you are being quoted a margin of .95%

    Its not a bad offer- but you could probably do better if you shop around.

    The tracker rate will vary depending on whether ECB rates go up or down (at the moment it is looking increasingly likely that they may in fact rise, contrary to what the economists for a lot of Irish banks suggest).

    You are currently paying about EUR1,420 in interest only repayments per month on your 5.35% fixed rate. If you go to tracker at 4.95% and continue to pay back the same amount- you would be making capital repayments of about EUR108 a month (at current rates)- around EUR1300 per year. You would get slightly lower TRS (providing your still under the threshold) but its minor.

    S.


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    #3
    blahblah06
    Registered Users Posts: 4,306 ✭✭✭blahblah06


    Thanks for a great reply. It sounds kind of 50.50 to go for but then again if the rates go up i doubt they will go up half a percent?

    Just a question when you say if im still under the threshold for trs what do you mean ?


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    #4
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,505 Mod ✭✭✭✭johnnyskeleton


    What kind of interest only mortgage did you get - i.e. what was the original agreement for paying back the principle (i.e. endowment mortgage, interest free for 2 years then switch to annuity etc)?

    You're better off with the cheaper interest rate, and unless you have some other plan to pay off the principle, you're going to have to start paying it eventually.
    blahblah06 wrote: »
    Just a question when you say if im still under the threshold for trs what do you mean ?

    The maximum amount of tax relief you can claim is capped. So a single FTB can claim a maximum of €2,000 per annum (i.e. 20% tax relief from €10,000 interest paid. So someone who pays €1,000 interest per month on their mortgage will get the same TRS as someone who pays €2,000. If you have a really big mortgage, it won't make a difference to the TRS if you change to the tracker rate, but if you are paying close to the limit, you will get less TRS).


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    #5
    blahblah06
    Registered Users Posts: 4,306 ✭✭✭blahblah06


    Hi ya. I understand now. its a 5 yr then switch over.

    They offered me a 4.65 percent fixed for 2 years. I think thisis a much better deal what do you think


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    #6
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    blahblah06 wrote: »
    They offered me a 4.65 percent fixed for 2 years. I think thisis a much better deal what do you think

    I think thats a fair enough offer- I'd take it.

    Shane


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    #7
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,505 Mod ✭✭✭✭johnnyskeleton


    blahblah06 wrote: »
    Hi ya. I understand now. its a 5 yr then switch over.

    They offered me a 4.65 percent fixed for 2 years. I think thisis a much better deal what do you think

    What will they hit you with after that? Try to make it so that you move onto the tracker rather than variable rate afterwards.


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