Mortgage Fixed Term - 10, 5 or 3 years?

cate

I'm looking at changing my variable mortgage with BOI to a fixed rate. Should I go for 10, 5 or 3 years? I am likely to want to release the equity for home improvements within the next 5 years - would that affect my choice? I have only 12 years left on my 30 year mortgage.
A little advice would be appreciated.
Thanks in advance,
Cate

Peregrinus

Why are you looking to fix? Impossible to say how long you should fix for unless we know what you hope to gain from fixing.

cate

Looking to go fixed because my interest rate is at 4.550% currently and if I go fixed it will drop to 3.950%, 3.300% or 3.100% for 10, 5 or 3 years. My interest rate hasn't changed for years - so why not go for fixed when it is lower? Interest rates aren't likely to drop.

km79

cate wrote: »

Looking to go fixed because my interest rate is at 4.550% currently and if I go fixed it will drop to 3.950%, 3.300% or 3.100% for 10, 5 or 3 years. My interest rate hasn't changed for years - so why not go for fixed when it is lower? Prices aren't likely to drop.

I was at 4.3 with ulster bank after years at 4.65:(
Fixed for 3 years last July at 3.6 as we indeed selling in 3 years
No way I would fix for 10 tbh
I'd take up the 5 year option BUT investigate whether you can release equity while fixed
I'm not so sure you can

Peregrinus

cate wrote: »

Looking to go fixed because my interest rate is at 4.550% currently and if I go fixed it will drop to 3.950%, 3.300% or 3.100% for 10, 5 or 3 years. My interest rate hasn't changed for years - so why not go for fixed when it is lower? Interest rates aren't likely to drop.

The fact that the fixed rates are lower, and the longer the fix the lower they get, suggests that the market thinks that interest rates are likely to drop.

The market can be wrong, of course, and if you think the market is wrong and are willing to back your own intuition then you should fix. And, if your intuition is correct, you should fix for whatever term will give you the lowest interest rate.

jameshayes

Changing mortgage providers would be a better option to get a decent interest deal but with 12 years left I wouldn't be fixing for 10 for sure..

Have you used any calculators to find out how much fixing would save?

daheff

Peregrinus wrote: »

The fact that the fixed rates are lower, and the longer the fix the lower they get, suggests that the market thinks that interest rates are likely to drop.

No it doesnt. In a very general sense it might, but specifically for Irish banks they are price gouging SVR mortgages (because people prefer variable mortgages in Ireland) -or using SVR rates to cover loss making tracker mortgages (whichever you believe).

However, if you look at BOI, their stated intentions (not quite policy) is to have higher SVR than fixed as they want to encourage customers to take up fixed rates as they see a rate hike coming in the next year or two. And if you were up to speed on your ECB meeting reviews you'd see that this is a distinct possibility in the next 12 months. Rates are not going to drop any further. Individual banks might be able to drop their rates slightly but in general terms this is as low as we will probably ever see.


To answer the OPs question, if you are intending on an equity release inside the next 5 years, then the most I would fix for is 3 years. If you fixed for longer you would probably be charged a breakage fee by the bank to remortgage (equity release) in the future.

Trish56

It's more than likely that interest rates here will increase in the next 12/18 months. You need to take into consideration that if you fix now on a 2 or 3 year fixed rate that when it expires both variable and fixed rates will more than likely have increased. BOI ten year fixed rate is not a bad rate and gives you peace of mind of what your repayments will be for the next 10 years.

Regarding the equity release, this will be a separate mortgage so will not affect the existing mortgage if fixed.

You should consider switching lender at the moment where for example depending on your loan to value you can avail of rates as low as 3.1% and also get 2k cash back of which approx. 1k will go towards legal and valuation expenses. It's not a huge amount of work to do so and should be completed in 4/6 weeks. If you move lender you can also take a split package i.e. 50k variable and 100k fixed, that way you can make lump sum repayments off the variable part of the mortgage without penalty.

daheff

Trish56 wrote: »

Regarding the equity release, this will be a separate mortgage so will not affect the existing mortgage if fixed..

Thats not necessarily true. Your mortgage lender may require it all to be bundled up into one tranche. Best check with them before you fix the mortgage term.

Trish56

If your lender requires you to bundle two or more loans into one tranche its called a remortgage. An Equity release is totally different and can be for a shorter term and at a fixed or variable rate and is a separate loan.

From BOI website
Equity is the difference between the value of your property and what you owe on your mortgage loan. If the value of your home is greater than what you now owe on your mortgage, you may be able to ‘top up’ your mortgage through Equity Release, which is an additional mortgage loan secured on the property.

daheff wrote: »

Thats not necessarily true. Your mortgage lender may require it all to be bundled up into one tranche. Best check with them before you fix the mortgage term.