Good idea to give up tracker now with rates rising?

Dub4747

Re: mortgages, has anyone received any good advice recently about giving up a tracker mortgage now that rates are rising so much? The old advice was never give it up but now that rates are increasing and do not seem to be coming down anytime soon it does not seem to be the case necessarily?

We sold our old house and wanted to take our tracker with us (on the remaining portion) to the second house we're buying but even though ours was really low (ECB + .75) the banks add 1% on when switching so the rate for us now would be at least 4.25% whereas there are 4 year fixed rates of 3.2% right now and rates are expected to rise more this year.

I don't think anyone expects the days of the 0% ECB to return again but it's hard to walk away from the tracker even though it seems the right thing to do!??

We will have 19 years left on our new mortgage.

Thanks

Jim2007

There is no right or wrong answer to this question they are two different financial products with their own advantages and disadvantages, which product is best for you entirely depends on what you are trying to achieve. If you want certainty in your budgeting then a fixed rate product might be best for your proposes for example if you are on a fixed income such as a pension, annuity or royalty type situation. On the other hand if you are comfortable to take a bit of a gamble and you are likely to be able to command a higher income in inflationary period a variable rate product might be your choice.

NSAman

I can only speak for myself....

The answer is absolutely NOT.

My rate is still 3 points lower than the variable rate for the current time.

So Interest rates have risen and will continue to rise, according to many reports. Variables are also rising.

I'm one of the lucky ones, my mortgage in Ireland is about to finish in a couple of years. I have been overpaying it and will continue to do so. Yet despite some "incentives" from the mortgage company, I have maintained the tracker and will continue to do so.

Dub4747

https://www.boards.ie/discussion/comment/120166498#Comment_120166498

How can you have a tracker rate 3% lower than the current variable rate as AIB's variable is 2.95% and the ECB rate is 2.5% before any extra is even added to it like the .75% we had? 🤔 Am I interpreting your response wrong?

NSAman

AIB current variable with 80% LTV is 2.95% which is bound to rise.

Fixed ranges up to 4.5%.

Last time I looked my .25% above ECB was 1.5% which has actually raised to 2.5% currently (sorry I was out by 1 point).

Variables will simply rise. Seeing as the rate I took it out at was significantly higher (idiot that I am should have been paying more all along).

As I said, my mortgage is nearing payment so I am lucky.

walterking

A 1.75% tracker has no value and hasn't had any great value for the past 2 years since Avant came into the market.

If your tracker was still 0.75% that would be worth keeping.

I'd jump at 3.2% for 4 years as it may not be available next week. I'd be tempted at 3.55% for 7 years.

ECB has stated that its medium term target is 2% and usually they stick to what they say. So that would mean 3.75% when inflation settles and the ECB is back on auto pilot.

In the meantime rates will move to 3.5% (slight chance of higher, but I suspect they will pause at 3.5%) and it will be late 2024 or 2025 before you could see small drops towards the stated goal of 2%.

But 1.75% tracker holds no real value.

walterking

https://www.boards.ie/discussion/comment/120166498#Comment_120166498

If you are on 0.25% tracker, then you have the lowest tracker rate in the country. I've had a strong interest in trackers for many years and advised many people and never came across a 0.25% tracker.

Generally the lowest was 0.5% with Danske bank and 0.75% with Bank of Ireland.

And those rates and rates up to 1.25% are worth holding onto. 1.5% is borderline and above that has no real value

But it is easy and has been easy to get medium term fixed rates at less than 2% above ecb and that looks like it will continue due to the good competition in the market

Hotblack Desiato

My situation:

Owe 100k @ ECB+1.1% with BOI, about 9.5 years left.

Requested through BOI online today to send out options for fixing, from their website I could get 10 years at 3.8% or 5 / 7 years at 3.55/3.6% (IIRC)

We can afford if payments rise (within reason) for a year or two before settling back.

My thoughts are given the low-ish tracker margin and relatively short term, any potential gain or loss by fixing isn't really worth writing home about either way.

Don't see any value in fixing for 5 years anyway as the variable rate we'd be on for the next few years is likely to be crap - cancelling out any possible gain - although we might be in a position to rapidly clear the mortgage by that point.

If the term is just short of 10 years will they offer a 10 year fix and take it to mean for the entire term? and presumably no penalty as the loan is not actually being paid off early?

I'm 80% certain I'll stick with the tracker but still the idea of just fixing for the whole term and forgetting about it does have some appeal. We've no intention of moving house.

I was this close to requesting fixing options in November but I was afraid I'd be committing to something (I now know I'm not) - which would have been cheaper than now - but the predictions of peak ECB rates then weren't as high as now, either. So the potential gain in the first couple of years anyway looks about the same.

Lord Nikon

My mortgage was with Ulster Bank, so it was taken over by Scarriff Pretoria, now with Cabot Financial. Once ECB increase their rates, Cabot increase theirs the same day. My mortgage has gone up €400 a month within the last 6 months, wonder if there is anyway I can move providers?

tjhook

https://www.boards.ie/discussion/comment/120191484#Comment_120191484

In principle yes, you can move your mortgage to another provider. Of course the new provider would have to be willing to take you on, which would depend on your credit history etc.

I doubt that any new provider will offer you a tracker, so if you're on one now, you'll have to move to an ordinary fixed or variable rate.

geotrig

Similar to a few above around 150K left on ECB @1.1% tracker and just over 15years to go and have decided to stick as we think rightly or wrongly that overall the lows will overwrite the highs as well as any hassle !! and the thoughts of variable rates after the fixed term ended didnt appeal much. if we had a shorter term under 10 we might have fixed if it suited rate wise.

brokenbad

Currently on a tracker with Permanent TSB.

Moved house 5 years ago, cleared off the existing mortgage and borrowed enough to cover the cost of the new house plus renovations.

At the time PTSB introduced an incentive for people who had trackers but were considering moving (Home Loan - Mortgage Mover ECB+2.68%)

Paying 5.18% interest rate at present.

Mortgage has increased by almost €100/month in the past 6 months with 4 rate hikes to date and counting....

I owe €73k with 7 years left on my mortgage.

With another interest rate hike just announced and more on the horizon - should i consider moving to a fixed rate now or just ride it out?

Henry Ford III

Fix for certainty not for profit.

Hotblack Desiato

An ECB+2.68% tracker is worthless, even if interest rates settle at 1.5% in a couple of years time (perhaps a little optimistic) you'd still be paying more than if you fixed now.

walterking

https://www.boards.ie/discussion/comment/120189895#Comment_120189895

Its 100k balance - it will not be a big difference either way as balance continues to reduce. In you case every 0.5% will cost you €40 a month - next year that will be €36 a month, the following year about €32 a month as your balance will continue to drop.

Unless something strange happens, you will see another 0.5% hike and then either a 8-12 month pause or a 0.25% hike followed by a 8-12 month pause. That's what the financial markets are betting and very few are saying anything higher than a final 0.25%

walterking

https://www.boards.ie/discussion/comment/120195371#Comment_120195371

GET RID OF THAT TRACKER FIRST THING ON TUESDAY.

That is a rip-off. Even their standard variable rate is cheaper. You are throwing money away but your balance is low so you haven't be throwing too much away.

5 year fixed 3.6% and you will be saving money immediately. At the end of 5 years your balance will be about 25k, so you won't be concerned about rates

You could take their 7 year fixed at 3.8% and know your mortgage repayment will never change

walterking

https://www.boards.ie/discussion/comment/120191484#Comment_120191484

Talk to a broker.

If you have good equity and have a clean credit record for the last 5 years, you should be able to switch.

Bank of Ireland have taken a few switchers from the investment funds once they can show a 5 year clean credit record.

Hotblack Desiato

https://www.boards.ie/discussion/comment/120197692#Comment_120197692

Thanks, that's as I suspected.

BOI rang me today and gave me the expected talk about losing tracker etc. if I fix. I did ask if it was possible to fix for the entire term - no, as the term left is 9.5 years the 10 year fix is off the table. Longest on offer is 5 years which then would leave nearly 5 years to go, a 2 or 3 year fix could be an option then but who knows whether fixed rates will be good value in 5 years time or not.

Better to stick with the tracker I think. They're sending the fix options out next week, unless I choose one of the options then nothing happens.

Bass Reeves

https://www.boards.ie/discussion/comment/120199851#Comment_120199851

What is your tracker rate

Hotblack Desiato

It's at the start of my first post. ECB+1.1%.

Bass Reeves

https://www.boards.ie/discussion/comment/120206886#Comment_120206886

Probably better to stick with the tracker now. Ya if you fixed at about 2-2.25% last year it would have been a good decision. Then again will we see rates below 2% in the next 5 years. I think rates will say in the 2+% for a long while