Mortgage - 3 or 5 year fixed

skerry

Hi folks, after a lot of searching the other half and I have finally gone sale agreed on a house. We are lucky enough to have approval with 2 banks, AIB and BoI. AIB are offering low variable rate and high rate to fix and BoI the opposite.

We think fixed is a better option to go with for us as from what I understand interest rates are only going to go one way in the near future. BoI are offering very competitive fixed rates and 3% back over the first 5 years.

We can get fixed rates of 3.2% for 3 years and 3.35% for 5 years. Just wondering what peoples thoughts on fixing is at the moment, would 3 or 5 years be advisable?

I know the decision is unique to everyones situation but just wondering what the general thinking is given the way interest rates are supposed to be going.

Any input, advise or opinions are welcome.

The Bishop Basher

As you said yourself, no one can really advise you one way or the other as none of us have a crystal ball but having spent the last 8 years on a variable, we've just fixed for 3 years in a much lower rate. We were offered the option to fix for 5 years at an even lower rate but we both felt a lot can change in that time and it is a long time. Not suggesting you should do one thing or the other but hope this helps somewhat.

wordofwarning

Mortgage rates are more likely to go down than up. Why is BOI pushing customers to go onto fixed? If the only way rates are going is up, why would they not want all of their customers to be on variable to get more money as the rates go up? The fact BOI are pushing fixed so much indicates that rates will go down

The ECB is not likely going to hike rates for years. You will hear serious rumours when they will hike rates giving you time to fix them

skerry

wordofwarning wrote: »

Mortgage rates are more likely to go down than up. Why is BOI pushing customers to go onto fixed? If the only way rates are going is up, why would they not want all of their customers to be on variable to get more money as the rates go up? The fact BOI are pushing fixed so much indicates that rates will go down

The ECB is not likely going to hike rates for years. You will hear serious rumours when they will hike rates giving you time to fix them

Part of me was thinking the same thing, but then on the other hand you have AIB offering the most expensive fixed rates on the market and one of the cheaper variable rates so they are pushing people into the variable option.

I'd have thought all the banks would be going the same way with their rates but the two big ones seem to be both pushing people into going down different routes, which is pretty much confusing the hell out of me. Its like one of them knows something the other doesn't.

phormium

Banks push fixed rates as a retention tool, you can't switch to another lender while within the fixed term so it guarantees them your business for that length of time at least.

AIB is probably looking for new business and switchers, chances are then when they have success with this they will also offer good fixed rates to them to keep them.

So BoI are trying to stop AIB pinching their customers It's all a game!

worded

skerry wrote: »

Hi folks, after a lot of searching the other half and I have finally gone sale agreed on a house. We are lucky enough to have approval with 2 banks, AIB and BoI. AIB are offering low variable rate and high rate to fix and BoI the opposite.

We think fixed is a better option to go with for us as from what I understand interest rates are only going to go one way in the near future. BoI are offering very competitive fixed rates and 3% back over the first 5 years.

We can get fixed rates of 3.2% for 3 years and 3.35% for 5 years. Just wondering what peoples thoughts on fixing is at the moment, would 3 or 5 years be advisable?

I know the decision is unique to everyones situation but just wondering what the general thinking is given the way interest rates are supposed to be going.

Any input, advise or opinions are welcome.

Go 3 years

Thefact

If your LTV is close to the 80% mark it might be better fixing for a year and hope the rising market will take you into the 61-80% category and then you can fix for 3% with BOI.

TheShow

wordofwarning wrote: »

The fact BOI are pushing fixed so much indicates that rates will go down

The ECB is not likely going to hike rates for years. You will hear serious rumours when they will hike rates giving you time to fix them

aw, thats so funny!!:D:D:D

over the next 12 months or so i think we will slowly start to see the ECB increase, which will knock up the standard variable rates. BOI fixed rates are so low at the moment because they are making a market share grab. Doing the same on the business side - undercutting other banks by 50 or 100 basis points.

I'd probably go 3 year fixed, just to hedge my bets, but that 5 year rate is impressive. Monthly repayments cant be much different, and gives you peace of mind for 5 years. the question is though, do you want to be locked in for 5 years.

Trish56

AIB allow their existing customers who are on variable rates fix at the same rate as new customers. You need to check if BOI do and also take into consideration that BOI standard Variable rate is 4.50% and AIB are 3.40%.

If you fix now for 3 years and rates start to increase in 18 months then when you're 3 year fixed is up then you will be in a higher rate environment so thread carefully. I reckon AIB will eventually reduce their fixed rates so they are competitive with other lenders.

skerry wrote: »

Part of me was thinking the same thing, but then on the other hand you have AIB offering the most expensive fixed rates on the market and one of the cheaper variable rates so they are pushing people into the variable option.

I'd have thought all the banks would be going the same way with their rates but the two big ones seem to be both pushing people into going down different routes, which is pretty much confusing the hell out of me. Its like one of them knows something the other doesn't.

Bob24

If everything else was the same I'd personally go for 5 years fixed rate as while I have no crystal ball I don't see how rates could go much lower while I definitely see how they could get higher.

Having said that one key difference would make me go for variable: if you fix, you are forfeiting the option to make early repayments. This means that if your actual repayment capacity is higher than the mortgage schedule because you kept a safety margin, or if for any reason you get extra cash you want to put into the mortgage - you won't be able to do so for the first 5 years. Depending on your plans this could be a problem for you (I know it would be for me).

skerry

TheShow wrote: »

aw, thats so funny!!:D:D:D

over the next 12 months or so i think we will slowly start to see the ECB increase, which will knock up the standard variable rates. BOI fixed rates are so low at the moment because they are making a market share grab. Doing the same on the business side - undercutting other banks by 50 or 100 basis points.

I'd probably go 3 year fixed, just to hedge my bets, but that 5 year rate is impressive. Monthly repayments cant be much different, and gives you peace of mind for 5 years. the question is though, do you want to be locked in for 5 years.

Thanks. Your right, for fixed rates BoI are about the best in the market at the moment, but as far as variable goes their very expensive (4.5% I think). Regards repayments, there's only about €25 difference in the monthly payments between the 3 year and the 5 year fixed rate.

We have a second property which we will be renting for a few years, at least until the market improves enough in our area that it's worth selling. I can't envisage that will be anytime soon though and realistically we're going to be putting any spare cash into renovations in the new house for a while yet.

I'm only getting to grips with the hole mortgage thing now that it's a reality that we'll be drawing one down soon, but from what I understand interest rates are going to be on the rise in the not too distant future.

It would be good to have surety on repayments for 5 years, although it is a long time. I'd just be concerned as Trish56 said above, that after the 3 year term the mortgage rates will be probably higher and then your locked to those rates.

BoI said you can repay up to €65 extra a month without penalty, which doesn't sound like much but adds up.