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Variable -v- Fixed Rate Mortgage

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  • 30-04-2012 8:24pm
    #1
    Amzie
    Registered Users Posts: 547 ✭✭✭


    Hi guys,

    Myself and my boyfriend are first time buyers. We're after seen a house, putting a booking deposit down etc. but today the mortgage broker rang wanting to talk to us about mortgage interest rates.

    So basically we are getting the mortgage through bank of ireland/ICS and the rates we were giving are like this

    Variable @ 4.05%
    1 yr fixed @ 4.59%
    2 yr fixed @ 4.79%
    3 yr fixed @ 4.99% and finally
    5 yr fixed @ 5.59%.

    We are really confused about what to do:confused: We were thinking the 5 yr fixed and after TRS our mortgage would be about €650 p/m. IS this a good idea in todays climate??

    Ideally we like the idea of knowing what were paying each month however as appealing as the variable is its just so uncertain. What way are the markets going to in the next year or 2?? So any help as to which one to go for would be greatly appreciated!!

    Thanks:D


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


    You're really asking people to look into a magic crystal ball and tell you what they see. Anyone who claims to have an insight into this with any degree of accuracy- is talking through their hat.

    However-

    Lets look at whats happening in the wider Eurozone and how this may affect interest rates.

    The current ECB overnight rate is 1%
    The current Eurozone inflation rate is 2.8%
    The stated inflation target is 2%- which would indicate that interest rates are more inclined to rise rather than fall.
    However- the inflation rate is falling- purely as a result of poor consumer sentiment and lack of credit- rather than falling through interest rate policy.
    If inflation continues to fall without any change in the interest rate- there could be the possibility of a further cut in interest rates- however this is only a longshot at the moment.

    The fixed rates seem rather high to me to be honest- given the longterm funding the ECB have made available to retail banks (as oppossed to the overnight rates).

    Shop around- see can you get better rates elsewhere.

    Don't factor TRS into the equation- its due to be abolished by 2017- so its not safe to factor it into longterm calculations.

    Gather information and see if you can get better rates elsewhere- the rates you're quoting here seem very expensive to me.


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    #3
    StillWaters
    Closed Accounts Posts: 1,799 ✭✭✭StillWaters


    It is hard to win with fixed rates. Unless you are very risk averse you are almost always better off with variable.


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    #4
    ted1
    Registered Users Posts: 23,521 ✭✭✭✭ted1


    There mad rates, why not go to AIB, they're the cheapest at the moment.


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    #5
    Man007
    Registered Users Posts: 167 ✭✭Man007


    Amzie wrote: »
    Hi guys,

    Myself and my boyfriend are first time buyers. We're after seen a house, putting a booking deposit down etc. but today the mortgage broker rang wanting to talk to us about mortgage interest rates.

    So basically we are getting the mortgage through bank of ireland/ICS and the rates we were giving are like this

    Variable @ 4.05%
    1 yr fixed @ 4.59%
    2 yr fixed @ 4.79%
    3 yr fixed @ 4.99% and finally
    5 yr fixed @ 5.59%.

    We are really confused about what to do:confused: We were thinking the 5 yr fixed and after TRS our mortgage would be about €650 p/m. IS this a good idea in todays climate??

    Ideally we like the idea of knowing what were paying each month however as appealing as the variable is its just so uncertain. What way are the markets going to in the next year or 2?? So any help as to which one to go for would be greatly appreciated!!

    Thanks:D


    First off aib are much cheaper secondly although nice to know what your payments are each month that's really all your paying for and that's peace of mind however at the moment the premium for this peace of mind is too much and you will nearly always end up paying more over the 5 years with fixed.

    Also remember with variable you can fix at anytime plus make lump sum or higher payments to reduce term you can't with fixed.


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    #6
    jameshayes
    Registered Users Posts: 3,772 ✭✭✭jameshayes


    Those rates are very high when you compare them to AIB rates, 3.24 with AIB as far as I remember compared to 4.04% with BOI?

    Thats an extra 90 euro per month based on a 200k mortage over 30 years.. an extra €32,448 over the course of the mortgage...

    If I was you i'd be applying to AIB pronto

    use "http://www.loanclc.com/" for calculating the total costs


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    #7
    Amzie
    Registered Users Posts: 547 ✭✭✭Amzie


    ted1 wrote: »
    There mad rates, why not go to AIB, they're the cheapest at the moment.

    We would love to go with AIB as rates are low!!... but they were offering the lowest mortgage amount and we couldnt get the house we are getting now if we had went with them.

    Its a pain but we are after deciding on the house and have put a booking deposit on it as its just what we were after:) so were thinking the three year fixed now maybe....oh decisions!!! Just dont want to take too much of a risk with the variable as were FTB's and my job isnt as safe as my bf so income levels could change :(


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    #8
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    PTSB cut their variable rates by .5% today- might be time to reassess the situation?


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    #9
    naughtysmurf
    Registered Users Posts: 3,262 ✭✭✭naughtysmurf


    Why not take the variable rate & save the difference between it and the 5 year fixed rate in another account.
    There are usually large penalties associated with leaving a fixed rate should you decide / need to in the future

    Personally I would take the variable, I've always been on a variable or tracker & I've always been better off over fixed rate (since 1995)


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    #10
    ted1
    Registered Users Posts: 23,521 ✭✭✭✭ted1


    Do you really want a mortgage that high? Your getting one AIB doesn't think you can afford and your paying a hefty premium for it.


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    #11
    StillWaters
    Closed Accounts Posts: 1,799 ✭✭✭StillWaters


    Why not fix 50% of the mortgage, and have 50% on SVR? That leaves you some flexibility to overpay should you wish.


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    #12
    dark_shadow
    Registered Users Posts: 389 ✭✭dark_shadow


    StillWaters wrote: »
    Why not fix 50% of the mortgage, and have 50% on SVR? That leaves you some flexibility to overpay should you wish.

    How do you mean overpay?? Pay off more of the mortgage a month than your supposed to?:o


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    #13
    StillWaters
    Closed Accounts Posts: 1,799 ✭✭✭StillWaters


    dark_shadow wrote: »
    How do you mean overpay?? Pay off more of the mortgage a month than your supposed to?:o

    Yes, exactly that. You can pay extra off the Principal sum, either on a regular basis, or on a once off. Its a way of either reducing the mortgage term, or the mortgage amount. You cannot do this if you are on a fixed rate.


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    #14
    dark_shadow
    Registered Users Posts: 389 ✭✭dark_shadow


    StillWaters wrote: »
    Yes, exactly that. You can pay extra off the Principal sum, either on a regular basis, or on a once off. Its a way of either reducing the mortgage term, or the mortgage amount. You cannot do this if you are on a fixed rate.

    Thanks for that stillwaters......really wasn't aware you could that!:)


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