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Aib variable vs fixed?

  • 03-05-2013 4:03pm
    #1
    gomamochi1
    Registered Users Posts: 542 ✭✭✭


    Hi folks we are currently on a variable rate mortgage and have been just hit again by the recent rate hike. Is it worth changing to a 3 year fixed? Awaiting the figures in writing Aib.
    Thanks
    Tagged:


Comments

  • #2
    Heisenberg1
    Closed Accounts Posts: 2,511 ✭✭✭Heisenberg1


    gomamochi1 wrote: »
    Hi folks we are currently on a variable rate mortgage and have been just hit again by the recent rate hike. Is it worth changing to a 3 year fixed? Awaiting the figures in writing Aib.
    Thanks

    Fixed for 2 years on Monday myself then AIB went and increased all the fixed

    rates two days later. The 1 year fixed was cheaper than the SVR on Monday not

    now though. IMO I would fix for two years another 0.5% will bring the SVR up to

    the current 2 year fixed rate. Hope this helps.


  • #3
    seefin
    Closed Accounts Posts: 1,079 ✭✭✭seefin


    Heard guy on Matt cooper recommending people fix as rates likely to get a lot higher and not much difference this stage between fixed and variable so advised people to fix before those rates also go up. Its sickening,what was point of ecb decreasing rate if not passed on!


  • #4
    dotsman
    Registered Users Posts: 3,635 ✭✭✭dotsman


    It all depends on a lot of factors. The main one being - how many price increases can you afford?

    With regards predicting where rates will go over the next few years is tough. Certainly, AIB have indicated that they won't be increasing rates again this year. Although that is not set in stone, it is realistic. therefore, what is the likelihood of a rate increase next year? Might there be 2? And when?

    Many people make the mistake of thinking that if variable rates increase beyond the fixed rate, then the fixed rate is the better option, but the question is "when?".

    For example, if a 3 year fixed rate is 0.5% more expensive than the current SVR, then, even if the SVR remains the same for the next 18 months, increases by 0.5% and then another year passes before it increases by 0.5% (resulting in the SVR being 0.5% more expensive than the Fixed rate), you are still better off having been on the SVR for the whole 3 years.

    Ultimately, a fixed rate is a form of insurance, and like most insurance, is priced slightly in favour of the insurer. If you are trying to "beat the banks" with regards what rate to choose, you really need to study the economic prospects for Ireland and it's banks for the next number of years. And then, it still will mainly depend on luck.

    If you want best (or worst if you look at it another way!) of both worlds, you can easily split the loan, fixing half and letting the other half be variable. That way, you don't stand to lose/gain much regardless of which way rates go.


  • #5
    namloc1980
    Registered Users Posts: 18,058 ✭✭✭✭namloc1980


    seefin wrote: »
    Heard guy on Matt cooper recommending people fix as rates likely to get a lot higher and not much difference this stage between fixed and variable so advised people to fix before those rates also go up. Its sickening,what was point of ecb decreasing rate if not passed on!

    The ECB rate has nothing to do with mortgage pricing. The 0.5% ECB rate allows banks to access liquidity from the ECB usually with a maturity of 1 week. Mortgages have a maturity of 20+ years.


  • #6
    gomamochi1
    Registered Users Posts: 542 ✭✭✭gomamochi1


    Got the rates from Aib-
    Current repayments- 4% Variable rate 1338.70- 210.80 Tax relief= 1127.90

    Fixed options-

    Time Interest Rate Repay Tax relief (6.35%) Amount due

    1 year fixed 4.55% 1384.86 - 218.08 = 1166.77

    2 year fixed 4.75% 1415.05 - 222.84 = 1192.20

    3 year fixed 4.75% 1445.56 - 227.60 = 1217.96

    4 year fixed 5.15% 1476.37 - 232.49 = 1243.88

    5 year fixed 5.35% 1507.49- 237.40= 1270.09

    I worked out the interest relief my self so may not be 100% correct. Have gotten varying advice. Some reckon go for the 5 years as nothing going to change in next 3 though may increase in the next 5. Not sure what to be at! Any ideas welcome! Thanks !


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  • #7
    GreeBo
    Registered Users Posts: 26,988 ✭✭✭✭GreeBo


    gomamochi1 wrote: »
    Got the rates from Aib-
    Current repayments- 4% Variable rate 1338.70- 210.80 Tax relief= 1127.90

    Fixed options-

    Time Interest Rate Repay Tax relief (6.35%) Amount due

    1 year fixed 4.55% 1384.86 - 218.08 = 1166.77

    2 year fixed 4.75% 1415.05 - 222.84 = 1192.20

    3 year fixed 4.75% 1445.56 - 227.60 = 1217.96

    4 year fixed 5.15% 1476.37 - 232.49 = 1243.88

    5 year fixed 5.35% 1507.49- 237.40= 1270.09

    I worked out the interest relief my self so may not be 100% correct. Have gotten varying advice. Some reckon go for the 5 years as nothing going to change in next 3 though may increase in the next 5. Not sure what to be at! Any ideas welcome! Thanks !

    Personally I dont think the variable rate will be up to 5.35% in the next 5 years, so Im going to stay variable. My LTV qualifies me for a lower than standard variable rate with AIB so Im better off staying variable anyway.(4.2% I think offhand)


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