What Term to Fix Rates At?

Fian

I would definitely fix for a long period, except that i expect i may want to sell in the coming years, so i need to stay on SVR.

If a full blown trade war kicks off between EU/US that would result in interest rates not rising, staying at these record lows, but i really don't expect to see any further falls. We are allready at negative interest rates for wholesale funds.

Cyrus

willabur wrote: »

Surely there must be something to prevent you from doing this. There would be droves of people leaving the cashback banks going to ulsterbank as soon as they pay out

there isnt i got cashback from EBS and BOI before fixing at 2.5% for 5 years with UB

autumnbelle

Fian wrote: »

I would definitely fix for a long period, except that i expect i may want to sell in the coming years, so i need to stay on SVR.

If a full blown trade war kicks off between EU/US that would result in interest rates not rising, staying at these record lows, but i really don't expect to see any further falls. We are allready at negative interest rates for wholesale funds.

This maybe a stupid question but why do you have to stay on a svr if you want to sell?

Cyrus

autumnbelle wrote: »

This maybe a stupid question but why do you have to stay on a svr if you want to sell?

worried about breakage fees i assume

cruizer101

Cyrus wrote: »

there isnt i got cashback from EBS and BOI before fixing at 2.5% for 5 years with UB

Do you mean you drewdown with EBS got your cashback, went to BOI got you cashback (maybe other way around) and then went to UB.
Fair play if you did that, I thought the cashback was only available on brand new mortgages not transfers.
I have to admit I'm a bit jealous, not sure I could deal with the stress.
Did you have approval from all three initially or did you just apply to ulster when you were a while into mortgage.

Fian

autumnbelle wrote: »

This maybe a stupid question but why do you have to stay on a svr if you want to sell?

As poster above states - you have to pay to break a fixed rate mortgage. the fixed rate mortgage allows the bank to take out fixed rate borrowings to fund it - they need the interest repayments to meet teh payments on their back to back borrowings/their commitment fee. Consequently you generally have to pay over the interest you would have paid over the term of the fixed rate to break the fixed rate contract / repay the mortgage. and of course you need to redeem the mortgage before you can sell.

So generally 3 elements to consider before fixing a mortgage:

1: are you happy you are ok to lose the flexibility to overpay/pay off the mortgage during the term/incurr the break fees.

2: do you think you will get better value over the term (depending on whether interest rates go up or down and by how much would you be better/worse off on a SVR)

and,

3: Is the certainty/security of the payments valuable enough to you that you think it is worthwhile on balance notwithstanding the risks of 1 or 2 working out against you.

Fian

cruizer101 wrote: »

Do you mean you drewdown with EBS got your cashback, went to BOI got you cashback (maybe other way around) and then went to UB.
Fair play if you did that, I thought the cashback was only available on brand new mortgages not transfers.
I have to admit I'm a bit jealous, not sure I could deal with the stress.
Did you have approval from all three initially or did you just apply to ulster when you were a while into mortgage.

These contracts originally had a clause preventing you from transferring (or rather clawing back the cashback offer if you did). I can't remember if it was the central bank, FSO or the courts who decided those clauses could not be enforced against consumers and that they were entitled to transfer notwithstanding the clawback clauses.

One thing to bear in mind about the cashback - it is functionally equivalent to a 2% lower interest rate for the first year of the mortgage. Which probably sounds a little less impressive than a 2% cashback.

hinault

If you can fix for the longest term on offer that you can afford, I would do so.

At present, and compared to historical data, we are in an ultra low bank interest rate environment today.
How long this environment will last is difficult to predict.

If I recall accurately the ECB had said that it would start to raise interest in 2019, at it's latest press conference. But how certain is that forecast?

My own personal viewpoint is that the ECB has little or no room to raise interest rates. The macro economic environment is still too fragile in my view. But with interest rates increasing in the USA (and Canada) pressure on the ECB could force it to start increasing rates regardless.

Cyrus

cruizer101 wrote: »

Do you mean you drewdown with EBS got your cashback, went to BOI got you cashback (maybe other way around) and then went to UB.
Fair play if you did that, I thought the cashback was only available on brand new mortgages not transfers.
I have to admit I'm a bit jealous, not sure I could deal with the stress.
Did you have approval from all three initially or did you just apply to ulster when you were a while into mortgage.

i did exactly as you stated in your first line, cashback available to switchers too.

it wasnt stressful at all to be honest, i did them one at a time, but the better approach appears to be to apply to all 3 simultaneously. Did it over about 12 months.

Cyrus

Fian wrote: »

As poster above states - you have to pay to break a fixed rate mortgage. the fixed rate mortgage allows the bank to take out fixed rate borrowings to fund it - they need the interest repayments to meet teh payments on their back to back borrowings/their commitment fee. Consequently you generally have to pay over the interest you would have paid over the term of the fixed rate to break the fixed rate contract / repay the mortgage. and of course you need to redeem the mortgage before you can sell.

So generally 3 elements to consider before fixing a mortgage:

1: are you happy you are ok to lose the flexibility to overpay/pay off the mortgage during the term/incurr the break fees.

2: do you think you will get better value over the term (depending on whether interest rates go up or down and by how much would you be better/worse off on a SVR)

and,

3: Is the certainty/security of the payments valuable enough to you that you think it is worthwhile on balance notwithstanding the risks of 1 or 2 working out against you.

with the new formula the breakage fees at the moment for recently fixed mortgages re negligible.

iluvfatfrogs

Cyrus wrote: »

i did exactly as you stated in your first line, cashback available to switchers too.

it wasnt stressful at all to be honest, i did them one at a time, but the better approach appears to be to apply to all 3 simultaneously. Did it over about 12 months.

to put figures on it, for example,

Drew down a €250k mortgage, received €5k in cash back (or against principle) from Bank 1.
Switched after a few months to Bank 2, received close to €5k in cash bank off them too.
And then in a few more months, switched to UB for a low interest fixed term?

Cyrus

iluvfatfrogs wrote: »

to put figures on it, for example,

Drew down a €250k mortgage, received €5k in cash back (or against principle) from Bank 1.
Switched after a few months to Bank 2, received close to €5k in cash bank off them too.
And then in a few more months, switched to UB for a low interest fixed term?

correct, it was a larger mortgage so made sense to do it as the cost to change was 1,400 in solicitor fees.

UB as well as having the best rate also give you 1.5k when you switch to them so they cover the legal costs.

jester77

Fian wrote: »

As poster above states - you have to pay to break a fixed rate mortgage.

It would depend on the deal you negotiate with the bank.

I fixed part of my mortgage for 20 years, after year 10 I can break at no cost or re-negotiate to extend the fixed term any time between year 10 and 20 if rates are more favourable for me.

Turkish1

Cyrus wrote: »

correct, it was a larger mortgage so made sense to do it as the cost to change was 1,400 in solicitor fees.

UB as well as having the best rate also give you 1.5k when you switch to them so they cover the legal costs.

Not sure when you went through this process. Not sure it would be quite as easy anymore, e.g. PTSB wont entertain a switcher unless have been with current bank for 2 years. I am assuming it is to deter this exact thing - would think this may be a consistent approach from the banks offering cash back up front which can't be clawed back.

Cyrus

Turkish1 wrote: »

Not sure when you went through this process. Not sure it would be quite as easy anymore, e.g. PTSB wont entertain a switcher unless have been with current bank for 2 years. I am assuming it is to deter this exact thing - would think this may be a consistent approach from the banks offering cash back up front which can't be clawed back.

Between December 16 and December 17/Jan 18

People are doing it today as well bit more sophisticated than I was as they are getting approval from all banks at the same time and with the help of a friendly solicitor you can complete the switches quickly

KBD85

Fian wrote: »

No, most people don't think they will fall much, most people think they will rise....

Why do people think interest rates will rise?

I believe our mortgage interest rates are already the highest in the EU so could foreign banks lend to use and the added competition would drive down interest rates?

Cyrus

KBD85 wrote: »

Why do people think interest rates will rise?

I believe our mortgage interest rates are already the highest in the EU so could foreign banks lend to use and the added competition would drive down interest rates?

foreign banks dont lend here because of the difficulty in repossessing assets (amongst other impediments)

Claw Hammer

KBD85 wrote: »

Why do people think interest rates will rise?

I believe our mortgage interest rates are already the highest in the EU so could foreign banks lend to use and the added competition would drive down interest rates?

Foreign banks were here for a few years, then got out. They sold off the loans they had given out for a fraction of the recoverable value. Don't be coming here anytime soon. Interest rates can only go one way at the moment. That is up. It is not a question of if they will go up, but when. The Irish banks are still in a very weak financial situation and will charge what they can in order to rebuild their balance sheets. In short, there are two virtual certainties. The first is that interest rates will rise at some point in the near term, and the second is that Irish banks will protect their profit margins on mortgages.

I recently fixed for 5, 10 was a tad too much of a gamble for me as I'd traditionally be against fixing conceptually.
Also I'm overpaying significantly as well so in 5 years time there shouldn't be more than a few years left of the thing. If rates go up significantly I'd hope to be able to just clear it rather than go on a higher rate.

aloooof

Augeo wrote: »

I recently fixed for 5, 10 was a tad too much of a gamble for me as I'd traditionally be against fixing conceptually.
Also I'm overpaying significantly as well so in 5 years time there shouldn't be more than a few years left of the thing. If rates go up significantly I'd hope to be able to just clear it rather than go on a higher rate.

I'd be interested in what Bank you're with if you can fix and overpay significantly? We're with BOI and can overpay by a max 10% per month. Currently, we can't afford more than that anyways, but would be good to know.

I'm with BOI too. I was on their very high SVR and was overpaying. I asked about switching to one of their fixed rates but told them I'd not be able to remain with them unless I was also able to overpay significantly on the fixed rate.

I had to include a letter with the switching rate form as an attachment, that stated what my agreed overpayment amount was.

They followed up by confirming all that in writing, my actual mortgage payment at 3% or whatever it is for the next 5 years is €9xx (dunno the exact number but about the €900 mark) and the agreed overpayment is €6xx.

So basically an agreed overpayment of 66% ish.

I can revert to the €9xx ish at any time but if I do I reckon I'll then be limiting further overpayments to the 10% but I'm not sure about that.

I found it preferable to actually switching but if they hadn't facilitated the overpayment at that amount I'd have gone elsewhere for a lower VR.

iluvfatfrogs

Anyone else get the feeling that the banks are lowering the short term rates to get us as customers , knowing that in the medium term interest rates are going up and when we all come off the short term deals, there wont be any options anywhere to switch to other lower interest rate deals?

They had to do something I reckon due to political pressure. I might be wrong of course. If things materialise as you say then at least folk got some value for 1, 2, 4, 5 years or whatever.

I went for 5 years thinking along your lines to be fair.

mugsymugsy

iluvfatfrogs wrote: »

Anyone else get the feeling that the banks are lowering the short term rates to get us as customers , knowing that in the medium term interest rates are going up and when we all come off the short term deals, there wont be any options anywhere to switch to other lower interest rate deals?

Yeah very good point and I do think something like this could be an issue when people come off the new deals they sign up to.

Supercell

aloooof wrote: »

I'd be interested in what Bank you're with if you can fix and overpay significantly? We're with BOI and can overpay by a max 10% per month. Currently, we can't afford more than that anyways, but would be good to know.

Thats weird, we fixed last year with BOI at 3% for 3 years after our previous 3.6% fixed term ended, and are overpaying by about €450 a month (standard payment would be around 950 at 3% , instead we are paying 1400). My recollection was that the over payment had to be agreed in advance of starting the 3% rate, it was all very straightforward.
I was just looking at bonkers.ie yesterday out of curiosity and it still seems like a pretty good deal and not worth the hassle to switch.
Would bite off anyone hand to fix for 10 years at 3% though. We have 11 years 4 months left on our mortgage to pay so that would see us very close to the end nicely with peace of mind.

Mooooo

If you look at the loan documents, the cost of funds presently is feck all, the majority of the interest is the banks margin. Issue with fixed rates isn't so much the rate it's that when the term ends the interest rates could well be a lot higher than now and you would have no choice to take a higher rate. If there is talk 're no charges if leaving the fixed rate or allowing overpayments etc be sure to get it all in writing. It depends really on the length of the loan left and personal circumstances.

sept17

I'm embarrassed to tell you all that I fixed 4.5 years ago to a rate of... 5.35% I come out of it in December, and will probably look to fix again. my loan to value will be around the 50% mark, so I hope to get a good rate . I didn't realise that you could agree a further payment against the principal, so I'll probably look to continue paying the same amount, with the difference going against the principal... I'll be very interested to see what rates the bank offer me in December...

iluvfatfrogs

sept17 wrote: »

I'm embarrassed to tell you all that I fixed 4.5 years ago to a rate of... 5.35% I come out of it in December, and will probably look to fix again. my loan to value will be around the 50% mark, so I hope to get a good rate . I didn't realise that you could agree a further payment against the principal, so I'll probably look to continue paying the same amount, with the difference going against the principal... I'll be very interested to see what rates the bank offer me in December...

I've a feeling you'll have very good options, probably the perfect time to be coming out of that rate infact!!

Supercell

sept17 wrote: »

I'm embarrassed to tell you all that I fixed 4.5 years ago to a rate of... 5.35% I come out of it in December, and will probably look to fix again. my loan to value will be around the 50% mark, so I hope to get a good rate . I didn't realise that you could agree a further payment against the principal, so I'll probably look to continue paying the same amount, with the difference going against the principal... I'll be very interested to see what rates the bank offer me in December...

Good time to fix for a longer term. You are intending to do exactly what we did - kept payment amount as before but on the lower rate. Our 25 year mortgage will be a 17.5 year mortgage this way, happy days.
Our intention is to keep paying the mortgage amount after its finished into a saving fund until retirement for our kids college fees and hopefully a bit left over to help them on their way when time comes for them to buy a house.If they want money for a lavish wedding they will be told to bog off!

davemie

I was talking with BOI yesterday about their rates. I'm currently on 3.9% variable with an LTV < 50%. Their fixed rate is 3% across the board and I'm not sure if anyone offers much better than that at the moment.

Normally I would be against fixing, but if there is an option to over pay I would be happy.

Quick question for anyone that is over paying on a fixed. Do you have to overpay by a fixed amount each month or can you do one off annual payments?

Finally, when talking to the 'mortgage expert' in BOI, I was told that is was not possible to tell me the cost of breaking out of a fixed mortgage until I had signed up to one because rates can change! It was not possible to give me an example at today's rates and it was not possible to tell me how it would be calculated, as how it is calculated could also change!

Surely that is complete BS! Surely they can't change T&Cs midway through a fixed mortgage? What would stop them asking for one million dollar!

Anyway, I did read that the EU forced banks last year to only change the deposit interest as a penalty and not the interest they could have made, but I didn't find any examples.