AIB Fixed Rate Mortgages Advice Needed

Lemlin

Looking at 170k over 30 years but wondered why all the different figures?

5 year fixed:
Years 1 - 5 797 EUR
Years 6 - 30 669 EUR

1 year fixed
Monthly Repayments
Years 1 - 1 663 EUR
Years 2 - 30 650 EUR

2 year fixed:
Years 1 - 2 698 EUR
Years 3 - 30 652 EUR

3 year fixed:
Years 1 - 3 734 EUR
Years 4 - 30 656 EUR

Variable is coming up as 667 EUR.

I heard on the radio the other morning that I should fix as long as possible but five year fixed is 797e. That's 130 euro more than sticking to variable.

Also, what happens at the end of the five years? I know it shows figures for 6 to 30 but I presume those can change and aren't fixed at that figure for definite?

If I got with fixed, can I definitely only pay 797e for the next five years and then interest rates affect it or what?

Lemlin

Anyone have any advice on this?

hshortt

I'm not giving any advice, but my experience was with a 10 year fixed and I got screwed completely. The rate was 6.75% when the actual varibable was 4 at the time. In order to get out of the 10 year agreement with 5 years left it cost over 12K. I suppose that it's different now, but you have to consider the advantages against the disadvantages and make your own decision.

+
You know exactly what you'll pay for the duration of the agreement.
You are not affected by increases in interest rates.

-
Current variable rates are lower than the agreement rates.
If rates stay low, you'll end up paying considerably more with a fixed agreement.

cheerio

Lemlin

hshortt wrote: »

I'm not giving any advice, but my experience was with a 10 year fixed and I got screwed completely. The rate was 6.75% when the actual varibable was 4 at the time. In order to get out of the 10 year agreement with 5 years left it cost over 12K. I suppose that it's different now, but you have to consider the advantages against the disadvantages and make your own decision.

+
You know exactly what you'll pay for the duration of the agreement.
You are not affected by increases in interest rates.

-
Current variable rates are lower than the agreement rates.
If rates stay low, you'll end up paying considerably more with a fixed agreement.

cheerio

But if rates go up (and they're now lower than ever so probably will) would I not get screwed?

And whats the crack with years 6 to 30 being shown? Is it fixing the cost for those too at the prices shown?

therecklessone

Lemlin wrote: »

Also, what happens at the end of the five years? I know it shows figures for 6 to 30 but I presume those can change and aren't fixed at that figure for definite?

If I got with fixed, can I definitely only pay 797e for the next five years and then interest rates affect it or what?

Usually, at the end of your fixed period you revert to the standard variable rate. The emphasis is on variable, that can go down or more likely go up (and not just in relation to the ECB rate, as Permanent TSB customers have found recently)

If you get a fixed rate that means it is fixed regardless of ECB rate changes, until the fixed period is up.

therecklessone

Lemlin wrote: »

And whats the crack with years 6 to 30 being shown? Is it fixing the cost for those too at the prices shown?

At a guess the years 6-30 are an indication of what you will pay when you change to the standard variable rate if rates remain as they are right now.

You really need to talk to your bank for detailed advice tbh.

dotsman

They are obliged to show you the rate after the "fixed period" is up. It is used in calculating the APR. It is quoted at today's variable rate, so it could be anything by the time the 5 year period is up.

Lemlin

Thanks for the info. The advice I've heard from experts is to fix as long as possible but there's a big difference between 667e and 797e. What do people think?

therecklessone

Lemlin wrote: »

Thanks for the info. The advice I've heard from experts is to fix as long as possible but there's a big difference between 667e and 797e. What do people think?

The variable rate will go up in the not too distant future, if not as a result of an ECB rate increase then as a result of the cost of inter-bank lending for AIB:

Robbie Henneberry, the bank's MD in the Republic <snip> told the committee that AIB would not be increasing its Standard Variable Rates at this point in time, but he said a rise in interest rates is inevitable at some stage.

You need to decide how much you can afford in terms of increases as the ECB rate goes up, or if you'd prefer to have the certainty that the fixed rate gives you for the next five years.

dotsman

Lemlin wrote: »

Thanks for the info. The advice I've heard from experts is to fix as long as possible but there's a big difference between 667e and 797e. What do people think?

Who are these experts? I hope you are not paying for their advice.

Under general conditions, one should never fix. You see, the fixed rate takes into account all future rises that the bank predict will happen (based on information available today). On average, fixed rates will always be more expensive than variable. You are paying a premium for the luxury of having a guarantee that repayments will never go above a certain amount.

Ultimately, a fixed rate is a very expensive form of insurance. I can't recommend one way or another to fix or not. It all depends on your aversion to risk. Me, I would not be fixing at all.

In your case, I would stick to the variable rate and put that extra €130 in a savings account. Should rates rise very high in the future, then you can use these savings to help pay. If they don't rise that much, then you have the benefit of all those savings. You also have to take into account inflation. Paying an extra 130 a month now will not be balanced out by saving 130 a month in 10 years time.

As I already said, it's entirely up to you and your attitude to risk.

Lemlin

dotsman wrote: »

Who are these experts? I hope you are not paying for their advice.

Under general conditions, one should never fix. You see, the fixed rate takes into account all future rises that the bank predict will happen (based on information available today). On average, fixed rates will always be more expensive than variable. You are paying a premium for the luxury of having a guarantee that repayments will never go above a certain amount.

Ultimately, a fixed rate is a very expensive form of insurance. I can't recommend one way or another to fix or not. It all depends on your aversion to risk. Me, I would not be fixing at all.

In your case, I would stick to the variable rate and put that extra €130 in a savings account. Should rates rise very high in the future, then you can use these savings to help pay. If they don't rise that much, then you have the benefit of all those savings. You also have to take into account inflation. Paying an extra 130 a month now will not be balanced out by saving 130 a month in 10 years time.

As I already said, it's entirely up to you and your attitude to risk.

Thanks for that. These experts are finiancial experts like Eddie Hobbs that I've heard on the radio. Someone else recommend that to me last night - to save any overflow of money into a saving account myself or even pay the extra bit off the mortgage each month.

eman66

I'm reading plausible arguments to fix now. The opinion is that the ECBs intention is to bring interest rates back to a normal 4.5-5.5% over the next 3-4 years. So, with the retail markup we could have 7.5-8.5%. Even if it doesn't go that high, a five-year fixed rate can be got for 3.8%.

A mortgage broker advised me to fix now for one year. I don't understand that. Surely, the next 12 months will be a pivotal period?

dotsman

I don't see why anyone would fix for 1 year. Interest rates are looking like they'll stay at their current low for up to a year (certainly until the end of this year).

The thing you must remember is even if you can fix at 3.8% now and expect rates to go above that over the next 5 years (which I think they will), the big question is when? You must remember that it is all about the average over that 5-year period.

If a bank is offering 3.8%, then they are basically saying that they see the average being circa 3.5% over the next 5 years. Fixed rates will always be in the banks favour (just like any other form of insurance/gambling). There is no such thing as predicting when is a good/bad time to fix. The banks have factored in all information available at the time. The only time you can say it it was a good/bad time is after the fact.

Again, I'm not saying whether one should fix or not. I'm just saying that fixing should be viewed as a form of insurance. Expensive, but potentially very useful (if rates were to go higher than the banks predict). Whether you choose the fix or not should be down to your attitude to risk and not based on BS media "experts". Besides his really strong Cork accent, stating the very obvious to people who were living outside their means and completely getting it wrong on his predictions for the property/world market, exactly what are/is Eddie's qualifications/expertise?

eman66

Thanks. I wasn't referring to EH, although I wouldn't be surprised if he is one of those on propertypin etc who are making the 7-9% predictions.

I think that the brokers thinking is that rates wont rise in the next 12 months, and current fixed teaser rates are lower than the current standard variable. I last spoke to him on the day of the PTSB rise and although he did wobble a bit at this he still maintained that the two big lenders wont increase in the next year. I don't know.

The difference for me between 1-year fixed and 5-year fixed will be €100pm, or a bit less, after MIR.