Fixed versus Variable Mortgages

Give this free advice to your friend - get a different advisor.

That's appalling advice considering standard variable rates have been HIGHER than most fixed rates for the past 10 years because the banks screw you on standard variable rates.

Long term fixed rates have never been better and are lower than most European equivalent rates - that's a first.

The Avant 20 year fixed is so good that it has caused a huge backlog in applications and they are taking more staff on to cope. - And is lower than almost all variable rates with ECB at zero!

That's how ridiculous the advice to go with a variable rate it. Stupid ridiculous and probably against the central bank rules.

Little know quirk with AIB and Haven (didn't check for the other lenders). Credit to the folks at Ask About Money Forum. The way AIB calculate the break charge (For overpayment and/or breaking from Fixed). If you take the 5 years Green (Or the standard 5 years or 3 years), it is almost always going to be zero break charge because the way they set the 4 years, 2 years and 1 year rate to be higher. Therefore when you take the formula into account regarding how they calculate, you will pretty much be getting a negative value for the percentage difference parameter (Especially with the rate rise expected).

Therefore you get the best of the rates and the option to overpay (like a variable) with no penalties.

Fix it for 5 Years Green if you can, or if not for whatever reason, standard 5 years LTV or 3 years LTV would be the next best choice (assuming you are with AIB)

The peace of mind that it gives is great. I believe you can also transfer it to another property if you move.

The current 0% ECB is due to the banking collapse and exceptional recession and safeguards have been put in place so that it cannot happen again, and therefore the chances of any decent term of 0% returning is very low.

The ecb's stated medium term target is 2% inflation and "neutral" interest rates. Basically 1.75%/2% interest rates. (this would mean circa 4.5-5% retail rates) But no-one can really say what things will be like in 10 or 15 years, but if I were buying a house today and could get 300k for a payment of 1255 a month and know that this will never change, I'd go for it.

You only have 9 years? If so there is not much difference either way. I'd fix for 5yrs. The balance after that would be small enough that a higher rate would not have a huge impact so I'd take the lower rate & hope for the best when it ends.

The ECB have basically said they'll announce an increase in their rates after their July monetary policy meeting, which is due to take place on July 21st, and most increases will likely come on the back of that, aside from those already announced, of course.

What effect in Euro would a .8% rate reduction have on 100,000 borrowing?

Looks like I was a bit generous with my time lines going on past performance from AIB. Have a gander at the deposit and lending rates truly different times 15 years ago.

24. (15.06.2007) AIB announces changes to its interest rates.pdf

depends on the term left and when the switch was done - you may only have had a part month at the new rate.

If 30 years, 100k loan would see a €41 drop per month.

If 15 years left, the .8% would see €38 drop

If 10 years left, 100k balance would see €36 drop

Over a year, this is about €450. If you pay high rate tax, its about €900 of your pre-tax earnings.

AFAIK that is only valid for AIB - not for their subsidiaries Haven and EBS.

Boi said they aren't passing on the rate increase so only tracker rates will rise.

What's your balance, term and rate you were paying before the rates increase?

Sounds about right to me. Before the interest rate increase I would have said your monthly repayments were about €633 and that will go to about €641 after the increase.

Your balance is 40k. Interest rates won't affect you much.

If rates went up by 5%, you would increase by about €110 a month. So a 0.5% increase is about €11 a month.

Rates are calculated daily on the reducing balance and spread over the remaining term. The interest portion of your mortgage is about €450 a year and reducing - the rest goes off your capital balance. Next July your balance will be about €33,000. If your tracker was at 4% at that point, the interest costs would be less than €1100 for the following 12 months.

Anyone with small balances and less than 5 years left need not be concerned that their payments will increase by much