Is this a time to fix mortgage?

Alter_Ego

Crystal ball question - is it a good time to fix a mortgage? I'm currently on 2,95% variable, but could get 2,55% on a 3 or 5 years fixed.



Realistically speaking, I don't see interest rates going anywhere below 2,5% in the Irish market for a foreseeable future. On the other hand, the impact on Covid 19 on the economy may mean an increase in inflation, which would likely drive the variable rates up.


So, does fixing it for 3 years seem like a prudent thing to do?

phelixoflaherty

https://touch.boards.ie/thread/2058056655/2/#post112637116

coylemj

Alter_Ego wrote: »

.... the impact on Covid 19 on the economy may mean an increase in inflation, which would likely drive the variable rates up.

Less people working is going to mean reduced demand for goods and services so there will be deflationary forces in play.

advertsfox

Uncertain times and you can fix it at 2.55% for 3 years? I'd be all over that.

Geuze

Alter_Ego wrote: »

Crystal ball question - is it a good time to fix a mortgage? I'm currently on 2,95% variable, but could get 2,55% on a 3 or 5 years fixed.



Realistically speaking, I don't see interest rates going anywhere below 2,5% in the Irish market for a foreseeable future. On the other hand, the impact on Covid 19 on the economy may mean an increase in inflation, which would likely drive the variable rates up.

So far, inflation is falling, although that's mainly driven by falling energy prices, not COVID.

The ECB have signalled that there won't be any increases in the ST interest rate from 0% soon:

https://www.ecb.europa.eu/press/pressconf/2020/html/ecb.is200604~b479b8cfff.en.html

"Sixth, we decided to keep the key ECB interest rates unchanged. We expect them to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics."

Alter_Ego

Thanks for all the replies, I think if I fix for 3 years, don't see the variable rate going lower than this over that term. If it does, so be it, I can live with 2,55% anyway. If it goes the other I know I'd be sorry I didn't fix it when I had a chance.

kenmc

Ulster bank 5 year 2.2% not tickle your fancy?

Pkiernan

Theres going to be a stimulus package. These usually involve interest rate cuts.

Geuze

Pkiernan wrote: »

Theres going to be a stimulus package. These usually involve interest rate cuts.

The ECB will not cut rates further.

If they wanted to, they would have done so already.

The Fed and BoE did cut rates.

The ECB was already at 0%, so has much less room to move rates.

Pkiernan

Geuze wrote: »

The ECB will not cut rates further.

If they wanted to, they would have done so already.

The Fed and BoE did cut rates.

The ECB was already at 0%, so has much less room to move rates.

I'm not talking about the ECB. There'll be an Irish Govt stimulus package which I think will drive Irish bank rates lower.

Q&A

Pkiernan wrote: »

I'm not talking about the ECB. There'll be an Irish Govt stimulus package which I think will drive Irish bank rates lower.

Government stimulus packages will likely be aimed at increasing employment i.e., target businesses.

Henry Ford III

Pkiernan wrote: »

I'm not talking about the ECB. There'll be an Irish Govt stimulus package which I think will drive Irish bank rates lower.

ECB set the rate. The only way Irish banks could make money cheaper is to reduce their margins.

Can't see that happening

Cape Clear

kenmc wrote: »

Ulster bank 5 year 2.2% not tickle your fancy?

Can a person working for an employer who has availed of the Covid 19 subsidy apply to switch provider?

Trish56

No lender will consider you for a mortgage if you are on the Covid 19 payment.

Cape Clear wrote: »

Can a person working for an employer who has availed of the Covid 19 subsidy apply to switch provider?

mcbert

So is it reasonable to expect that with reduced demand in the economy and/or stimulus that pressure on rates will be down, but as ECB rates are at 0% they are unlikely to drop much more, if any. So no harm perhaps waiting a few month to see what happens, as they are unlikely to rise?

But on the first report of a rise in people struggling with repayments, or defaults or whatever, I should fix at the lowest rate I can get...

Thoughts?

Pkiernan

What reason is there right now to see rates increasing over the next 12 months?

368100

Pkiernan wrote: »

What reason is there right now to see rates increasing over the next 12 months?

Banks cost of funding has gone up since March....this is how much it costs them to get money to lend out. It's likely that this will translate into rate increases but competition in the market could keep it down. If one makes a move to increase then they all will likely follow suit.

Geuze

Pkiernan wrote: »

I'm not talking about the ECB. There'll be an Irish Govt stimulus package which I think will drive Irish bank rates lower.

Two points here:

The Irish Govt stimulus package has started.

It's made up of PUP, TWSS, extra health exp, and business supports.

Second, greater borrowing by a Govt means increased supply of bonds, leads to possibly upwards pressure on bond yields, which means fixed mortgage rates may not fall.