On a tracker rate, should I fix?

nihicib2

So on 1.25/% rate, mortgage to mature in July 2026, paying €236 back every fortnight, €18,500 to pay back. With all this talk about the rates going up would it be a good idea to fix now. Or another alternative is that I have savings which would cover the mortgage but Im wary of doing that because they've always been my safety net, yet I know they're earning feck all as savings. Should I just pay off the mortgage and keep paying the mortgage money into a savings account. Any advice?

cuttingtimber22

https://www.boards.ie/discussion/2058246440/on-a-tracker-rate-should-i-fix

Expectation is that there could be as much as 1% increase on interests rates by year end. Possibly more next year.

Some considerations:

• Will that increase cause cost of living challenges?
• is your employment relatively secure?
• do you have any plans for other investments?
• will you earn anything on the savings?
• is there anything specific you need the cash for?

Note that once you lose tracker it is gone. Note that there may be penalties to break the fixed rate.

Bass Reeves

I presume you mean that you are on 1.25% above the ECB rate. If so you actual interest rtae is probable in the 1% rate. You can only fix for 3 years as I am not sure if they do 4 years fixed. Best 3 year fixed are at 2.5ish%. Interest rates would need to increase by 1.5% before you would achieve any savings. As you are mostly repaying capital and little interest at present I am not sure if it is worth the hassle.

On using saving to pay off assuming you average 3% on interest payments over the 4ish years( unlikly) you will pay about 1050-1100 euro in interest on the remaining mortgage

Bass Reeves

https://www.boards.ie/discussion/comment/119083195#Comment_119083195

I am not sure if you lose your tracker. AFAIK you revert back to it. However its a question you should ask before you change.

cuttingtimber22

Aside from the considerations in the first post, this is a possible idea:

1. Pay off mortgage.
2. Pay mortgage contribution into a pension scheme:
3. If you are taxed at higher rate, you will get tax relief on that contribution at 40% (contribute double or half and half with some into savings).

if doing this option, talk to an investment advisor or advisors.

cuttingtimber22

https://www.boards.ie/discussion/comment/119083207#Comment_119083207

Where have you seen that re reverting to tracker? I thought the tracker scandal was that banks offered this but then reneged. Did not know they still offered it.

nihicib2

https://www.boards.ie/discussion/comment/119083195#Comment_119083195

Im an SNA and we have no job security, last in first out, there's three that came after me but as pupils leave and if not enough come in the need our help then we could lose SNA's. I don't foresee any cost of living challenges as such, not a big spender. Not earning anything worth talking about on the savings but because of my job I always wanted the safety net, no other investments as wouldn't have the money and don't need the cash for anything right now. I'm wondering should I just bite the bullet and pay it off.

nihicib2

https://www.boards.ie/discussion/comment/119083197#Comment_119083197

Yeah maybe I should just wait and see how things pan out and if it gets too tight just use the savings to pay the mortgage, and then repay that money back every fortnight into the savings

standardg60

You wouldn't even notice any rate increases with that balance OP, stay as you are

Markcheese

Hedge your bets - pay off part of your mortgage - so that reduces any exposure to increased interest - and the risk of your savings being nibbled away by inflation -while leaving you with a reserve ..

I don't really see what you gain by going to a fixed rate , especially when include the costs to swap mortgage ..

Bass Reeves

https://www.boards.ie/discussion/comment/119083225#Comment_119083225

I taught the tracker scandal revolved around that they neverindicated anything on the paperwork but then refused to allow borrowers back onto tracker rates.

cuttingtimber22

https://www.boards.ie/discussion/comment/119083227#Comment_119083227

You may get good advice here. But it may just come down to your gut. I can understand why you would be in two minds.

I held on to cash as a fall back when friends were advising to knock it off the mortgage.

nihicib2

https://www.boards.ie/discussion/comment/119083215#Comment_119083215

Im already paying into a pension scheme and am at the limit before being taxed but Ill ask the advisor about this, on my wage Id be taxed on the lower end, thanks

nihicib2

https://www.boards.ie/discussion/comment/119083248#Comment_119083248

Yeah, my head is saying just pay it off and my gut is saying hold on to your savings but if I paid the mortgage and continued to save that 236 every fortnight until the maturation of the mortgage Id have more saved than I spent paying off the mortgage, well I think anyway. Id still have about ten thousand of a safety net in savings its just a big chunk of money to withdraw, for me anyway

nihicib2

https://www.boards.ie/discussion/comment/119083237#Comment_119083237

That's a good idea, I could pay off half and still have my wee safety net.

cuttingtimber22

https://www.boards.ie/discussion/comment/119083274#Comment_119083274

That may well be good advice.

Although check whether the payment against the mortgage reduces the term or reduces the monthly repayment.

Bass Reeves

https://www.boards.ie/discussion/comment/119083263#Comment_119083263

I would leave things as is. You have 28K in savings from what I can gather. It is neither a substancial or insubstancial amount. However in the next 5 years if you had to personally borrow 10K over 4 years at an interest rate of 8% ( if interest rates go up personal borrowing will go upas well) it will cost you over 800 euro in interest alone. Stay paying off. If interest rates raise to 3% or above consider paying some or all off. if not pay as you go.

nihicib2

https://www.boards.ie/discussion/comment/119083297#Comment_119083297

Yeah Ive 30,000 in savings and thats a good point about having to get a loan, that's why I reluctant to dip into the savings as the old adage of 'you never know when you'll need them' is in the back of my mind. I think all the talk of interest rates rising has spooked me. Thanks

standardg60

https://www.boards.ie/discussion/comment/119083225#Comment_119083225

They never reneged on it, they just didn't mention it. Customers coming off fixed rates were offered new fixed rates or variables, but if this was queried they also got the option to revert to their tracker.

Mary O'Rourke specifically stated that banks had actually drawn up lists of customers who were more likely to not question the absence of the offer to return to their tracker. In early 2008 i was offered a fixed/variable mortgage on an apartment, when i queried a tracker i was offered one straight away.

In late 2010 my tracker mortgage was transferred from joint names to my name only. Was fully expecting to lose the tracker rate given the change of contract, but was met with the response of 'ah no we wouldn't do that to you'!

Bass Reeves

https://www.boards.ie/discussion/comment/119083322#Comment_119083322

Just to give you an idea of how little it will effect you. If interest rates rose to 2%(at present the ECB has negative interest rates 0.25% I think) it would cost you 10 euro/week on your 18K loan. However economists are forecasting a rate rise in july anf d two more before the end of the year. That will bring rates to 0.5%. By July 2023 you should owe less than 13K.

At a rough guess you will be very unlucky if the interest rates ever cost you more than a 5 euro/week in extra payments. By the end of the year if economists are right the extra cost to you would be about 2 euro/week

nihicib2

https://www.boards.ie/discussion/comment/119083366#Comment_119083366

When you put it like that it makes a lot more sense to just ride it out as far as it is comfortable and pay some off if it gets too tight, thanks everyone for the advice. Has made me think a lot clearer😊

Bass Reeves

https://www.boards.ie/discussion/comment/119084821#Comment_119084821

Often we get caught up in nitty gritty. Newspapers, social media and TV journalists often create needless panic with glaring sensational headlines. Mortgage money is and will always be the cheapest money you borrow. If it's the only loan you have from 40-35 years of age on you should never have money problems