Fixed versus Variable Mortgages

ablelocks

I'd like to get boardsie opinions on variable versus fixed mortgages - we're in the process of switching from PTSB and are looking at 5 year fixed (or even the 10 year fixed) with BOI at 3.0 and 3.3%.

However, AIB have a 2.75% variable which is quite attractive in the short term, but my thinking is that standard variable rates in ireland will never go under 2.5 %, and there is a high potential for variable interest rates to rise over the next 3-4 years

Irish fixed rates over the 5/10 year term are at (from my ltd research) historically low rates - the chances of getting these rates in 3-4 years time is slim?

what do ye think?

MarkR

I came here today with the same question. From looking around, it seems that AIB's 2.75% is the lowest for me (LTV < 50%), but a five year fixed at 3% seems like a very good idea. Considering the rates are going to increase at some stage, and the only decreases we are seeing are from competition, I'm leaning towards fixing for 3, or pehaps even 5 years at 3%.

iluvfatfrogs

ablelocks wrote: »

I'd like to get boardsie opinions on variable versus fixed mortgages - we're in the process of switching from PTSB and are looking at 5 year fixed (or even the 10 year fixed) with BOI at 3.0 and 3.3%.

However, AIB have a 2.75% variable which is quite attractive in the short term, but my thinking is that standard variable rates in ireland will never go under 2.5 %, and there is a high potential for variable interest rates to rise over the next 3-4 years

Irish fixed rates over the 5/10 year term are at (from my ltd research) historically low rates - the chances of getting these rates in 3-4 years time is slim?

what do ye think?

What LTV will you be switching at?

ablelocks

iluvfatfrogs wrote: »

What LTV will you be switching at?

<50%

the 10 year rate at 3% (KBC) or BOI at 3.3% is also an option....

sword1

ablelocks wrote: »

<50%

the 10 year rate at 3% (KBC) or BOI at 3.3% is also an option....

10 years could be a good way to go, the banks are guaranteed to win with the five years fixed I think, they have the best information /analysis to evaluate it.

Trish56

KBC are offering 2.95% 10 year fixed for LTV less than 50% plus 3k cash back to switch. It's a good option if you intend to stay in the property for 10 years and legal fees should be approx. 1k.

iluvfatfrogs

Trish56 wrote: »

KBC are offering 2.95% 10 year fixed for LTV less than 50% plus 3k cash back to switch. It's a good option if you intend to stay in the property for 10 years and legal fees should be approx. 1k.

This sounds good to me (although you prob have to move your current account too??)

Trish56

iluvfatfrogs wrote: »

This sounds good to me (although you prob have to move your current account too??)

Correct as it includes 0.20% discount otherwise rate is 3.15%.

ablelocks

interesting article in todays irish times

The days of super-low interest rates seem numbered

Andrew Beef

We recently fixed at 2.5% for 5.5 years (with Ulster Bank).

I can’t see us regretting that decision.

adne

I seen the Ulster bank fixed rate of 2.6% over 4 years but it jumps to 4.2% after the 4 years.

If I were to switch is there anything that prevents me switching again when the 4 year fixed period expires.

CeilingFly

Safety net - If you fix for 5/10 yaars and find you want to move, the penalty for getting out of the fixed rate will be minimal as its based on "cost of funds".

Only if cost of funds are cheaper (highly unlikely as they are as low as they can go) would there be a penalty.

So in reality a ten year fixed has no barrier if you want to exit at any stage - unless cost of funds go into negative territory, but all signs are that ECB rates will start rising in mid to late 2019 and the money market usually pushes rates up a few months beforehand.

booooonzo

adne wrote: »

I seen the Ulster bank fixed rate of 2.6% over 4 years but it jumps to 4.2% after the 4 years.

If I were to switch is there anything that prevents me switching again when the 4 year fixed period expires.

I would be interested know this also.

If I get a 3-5 year fixed at 3.00% and at the end of the fixed rate term I'm not happy with the variable rate i've been put on, would there be penalties if I wanted to switch.

I have read conflicting reports on what happens when your fixed rate finishes.
Some say you just go on the SVR for your provider
Other say you go on a higher rate...

Is there a definitive answer or does it depended on the lender?

iluvfatfrogs

booooonzo wrote: »

I would be interested know this also.

If I get a 3-5 year fixed at 3.00% and at the end of the fixed rate term I'm not happy with the variable rate i've been put on, would there be penalties if I wanted to switch.

I have read conflicting reports on what happens when your fixed rate finishes.
Some say you just go on the SVR for your provider
Other say you go on a higher rate...

Is there a definitive answer or does it depended on the lender?

I had a look at Ulster Bank Website that quotes the 2.6%, I don't see anything to prevent switching once the term is up
They just seem to be alluding to what the rate will be after fixed term expires

CeilingFly

There is no issue switching to any rate available at the end of a fixed period.

The banks must show the assumed rate at the end of the fixed rate period and this is usually expressed as an "apr" and would reflect the current Standard Variable Rate. Its purely notional as rates can change at anytime and its an anomaly in how institutions must give information.

At the end of a fixed period a bank will usually give you the rate options available. If you do not select a rate, they will automatically put you on the standard variable rate as per your mortgage terms and conditions.



One point I'd also make - your mortgage is probably your single biggest expense in your life.

Take an hour or two and read your mortgage terms and conditions in full especially the rates section and any "special conditions". It will answer most questions you will ever have about it and allow you make informed decisions.

QuadLeo

CeilingFly wrote: »

There is no issue switching to any rate available at the end of a fixed period.....

At the end of a fixed period a bank will usually give you the rate options available. If you do not select a rate, they will automatically put you on the standard variable rate as per your mortgage terms and conditions.

Came here with this question too.

I'm currently on KBC LTV60-80% variable rate of 3.66%.
I'm thinking of fixing with KBC for 5 years at 3.05%.

At the end of the 5 years it states I'll be placed on the standard variable rate. What I can't figure out is will I be put on the standard variable applicable to my LTV bracket, or just the standard variable rate?

ted1

ablelocks wrote: »

interesting article in todays irish times

The days of super-low interest rates seem numbered

We’ve never had super low interest rates. ( excluding those on trackers) The rest of Europe has.

CeilingFly

ted1 wrote: »

We’ve never had super low interest rates. ( excluding those on trackers) The rest of Europe has.

But in the rest of Europe, if you don't pay your mortgage, repossession starts within 2-3 months and you are out after 4/5 months

In Ireland, you play the system, you don't pay your mortgage, you delay delay delay and about 4 years later the bank repossess - in the meantime all the mortgage holders paying on time are paying extra due to these scammers - I'm not talking of genuine people who open dialogue or do deals with the bank, just the scammers who live free and use every block possible to avoid paying.

That's why European lenders will not write business here.

CeilingFly

QuadLeo wrote: »

Came here with this question too.

I'm currently on KBC LTV60-80% variable rate of 3.66%.
I'm thinking of fixing with KBC for 5 years at 3.05%.

At the end of the 5 years it states I'll be placed on the standard variable rate. What I can't figure out is will I be put on the standard variable applicable to my LTV bracket, or just the standard variable rate?

Ask them, but this end of fixed term statement is just to comply with legislation. Once you are out of fixed, you are free to take up any rate available to you.

As banks don't know what types of rates will be around in five years, the statement defaults to saying "standard variable rate"

BlackEdelweiss

I thought I would resurrect this old thread instead of starting a new one with the same name and question. If needed I can start a brand new thread.

I am asking now as these posts are a few years old and the world appears to be heading in a downwards spiral for the last few years and no end in sight with Putin and his **** going on.

AIB have offered us a mortgage and want us to decide on a rate. I have no idea what to do. Fixed rates are lower than variable so I am tempted to do that but I have been advised to go variable. 20 year term, no intention of moving anywhere for a good few years if ever. I would like to pay it off a bit earlier by increasing payments once the kids move out if that is of any relevance. Any advice?

awec

https://www.boards.ie/discussion/comment/119084336#Comment_119084336

Who is advising you to go variable? I do not see how this makes sense in the current climate where rates are certain to go up. Going variable is basically either a bet that rates will go down, or giving yourself the flexibility to significantly overpay.

Fixing is IMO the most sensible approach right now, the only difficult question is for how long.

raxy

Even on fixed most lenders allow some overpayment so you I see ICS mortgages have increased their rates again. We applied to them at the beginning of the year. At the time the rate was 1.95%. By the time our approval came through that was raised to 2.4% so we applied to Avant. Now ICS is at 3.4% over 5 years. Variable rate is still 2.45.

Glad we didn't go with ICS now, even if we got the 1.95 rate at the beginning we'd end up rolling onto higher rates after the term. Cheapest to 1 of the most expensive in a few months & before any increases from the ECB.

macvin

Whoever "advised" you to go variable should be put up against a wall and shot. Worst ever advice with interest rates about to rise

Green 5 years fixed is the rate for you if the house qualifies.

Otherwise 5 years 2.45%

Jim2007

https://www.boards.ie/discussion/comment/119084336#Comment_119084336

Given the current economic climate it seems a bit odd to hear you are being 'advised' to go variable. Which begs the question, who is this advisor? A professional, Joe down the pub or the parish priest? And most important, what is their logic for reaching that conclusion.

At the end of the day, all you will get is opinions base on people's view how the economic situation pans out. The general consensus is that the recession will be deep and long, but the general consensus has not always been right. So before dismissing it out right, it would be interesting to hear where you are getting this advise from.

Amik

https://www.boards.ie/discussion/comment/119115339#Comment_119115339

+1 from me. Coincidentally a friend who is applying for a mortgage was advised to go variable as well and is pursuing it. His broker told him something along the lines that the variable rate can go up but would never exceed the fixed rates.

That's not true is it? Are broker commissions better on variable rates? :)

wally79

https://www.boards.ie/discussion/comment/119116898#Comment_119116898

If that were true then no one would ever choose a fixed rate

Amik

https://www.boards.ie/discussion/comment/119116916#Comment_119116916

He's not financially savvy. :P The way he explained it though made me question my understanding. I'll let him take the variable and watch how it goes. :)

I recently got a my first fixed mortgage and now wish I had a 10 year option instead of 5.

The Phantom Jipper

https://www.boards.ie/discussion/comment/119084336#Comment_119084336

That seems to be terrible advice on the variable.

If your house qualified for the Green rate of 2.15%, then that appears to be best option in my opinion. Arguably you might want the certainty of the longer term (7 or 10 year) but personally I'd rather take the lower rate than take a higher rate now on the chance that rates will be worse in 5 years time.

https://www.boards.ie/discussion/comment/119116898#Comment_119116898

Variable rates are already an order greater than fixed rates. That advice makes no sense.

awec

As I said before, there are 2 reasons to go variable:

1. You think that interest rates are going to drop significantly during the period you are considering fixing. Even then, they would need to drop early inside your fixed period for it to be something to be worried about. This is just not going to happen, rates are not going to go lower in the short/medium future than they are now.
2. You want to be able to overpay your mortgage each month. Even then, some banks will allow overpayments of a certain level on a fixed rate, so this really only becomes a concern if you are looking to significantly overpay.

Henry Ford III

Fix for certainty and not for profit. An old adage worth remembering.