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Fixed rates lower than variable, Is there a catch?

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  • 07-07-2015 12:50pm
    #1
    P_Cash
    Registered Users Posts: 712 ✭✭✭


    When times we’re good, to fix your rate you paid a premium possibly starting off at .3% extra for just a 2 yr over a variable rate.

    Now times aren’t so good, and the above isn’t the case anymore.

    With pressures from minister + the fact we are so high versus the avg in Europe banks have been asked to lower their variable rates, in the region of .75% cut.

    In my case, im with BOI paying at 4.05% variable, and received a letter stating that they have now a new set of fixed rates.

    https://personalbanking.bankofireland.com/borrow/mortgages/rate-table/?buyer_type=0

    Fixed rates lower than variable?, the lowest I could get is 3.6, take it for 2 yrs. But im killed out thinking is there a catch, will they drop variable rates, and they are trying to suck people in at 3.6% or higher.

    Are they allowed to do this? effectively forcing me to go fixed to get a lower rate. Where is our minister?


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    #2
    P. Breathnach
    Registered Users Posts: 12,089 ✭✭✭✭P. Breathnach


    Banks do what they think is in their interest (forgive the pun) rather than yours. They clearly believe that variable rates will be driven down in the next two years to some level below the 3.6% you are being quoted. So they are pitching you the fixed rate in the belief that you will end up paying at least as much as you would if you stayed on the variable rate.

    It's a contest between their market forecasts and yours.


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    #3
    P_Cash
    Registered Users Posts: 712 ✭✭✭P_Cash


    P. Breathnach wrote: »
    Banks do what they think is in their interest (forgive the pun) rather than yours. They clearly believe that variable rates will be driven down in the next two years to some level below the 3.6% you are being quoted. So they are pitching you the fixed rate in the belief that you will end up paying at least as much as you would if you stayed on the variable rate.

    It's a contest between their market forecasts and yours.

    Ya, I'm of the same thinking, banks look after themselves, nobody else.

    I'll stay variable


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    #4
    phormium
    Registered Users Posts: 3,302 ✭✭✭phormium


    Exactly as P.Breathnach says. Fixed were often lower than variable, there wasn't always a premium to pay. Often a bank's way too of tying you to them, if you fix for say 3 yrs then they don't have to worry about losing you as a customer as you can't switch.


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    #5
    Trish56
    Registered Users Posts: 1,256 ✭✭✭Trish56


    What's your loan to value ? If less than 60% you can switch to KBC and avail of a variable rate of 3.50% and they also pay you 2k. There is a requirement to open a current account with them if not rate is 3.70%. If you're on a variable rate with BOI you are paying 4.50% currently. You also get 50% off 1st years home Insurance. Legal fees and a valuation should cost you 1k and they pay you 2k to switch.
    P_Cash wrote: »
    Ya, I'm of the same thinking, banks look after themselves, nobody else.

    I'll stay variable


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    #6
    P_Cash
    Registered Users Posts: 712 ✭✭✭P_Cash


    Trish56 wrote: »
    What's your loan to value ? If less than 60% you can switch to KBC and avail of a variable rate of 3.50% and they also pay you 2k. There is a requirement to open a current account with them if not rate is 3.70%. If you're on a variable rate with BOI you are paying 4.50% currently. You also get 50% off 1st years home Insurance. Legal fees and a valuation should cost you 1k and they pay you 2k to switch.


    Wow, ok. I must look into this.

    Yes my loan to value is or should be less than 60%


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    #7
    enfant terrible
    Registered Users Posts: 4,559 ✭✭✭enfant terrible


    P_Cash wrote: »
    Wow, ok. I must look into this.

    Yes my loan to value is or should be less than 60%

    Be careful of what rate they put you on after the fixed term ends, i think KBC's variable rate is one of the highest.


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    #8
    Trish56
    Registered Users Posts: 1,256 ✭✭✭Trish56


    The rate I quoted was a loan to value (LTV) variable rate not fixed however if you did choose a fixed rate they all revert to a LTV rate and not their standard variable. :)

    enfant terrible wrote: »
    Be careful of what rate they put you on after the fixed term ends, i think KBC's variable rate is one of the highest.


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    #9
    enfant terrible
    Registered Users Posts: 4,559 ✭✭✭enfant terrible


    Trish56 wrote: »
    The rate I quoted was a loan to value (LTV) variable rate not fixed however if you did choose a fixed rate they all revert to a LTV rate and not their standard variable. :)

    Did they tell you they revert to a LTV rate? some people were on here recently complaining that KBC put them back on the variable rate.


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    #10
    Trish56
    Registered Users Posts: 1,256 ✭✭✭Trish56


    Unfortunately like all other lenders KBC penalise their existing customers many who are in negative equity and therefore cannon switch. If P_Cash wishes to switch he can choose a LTV variable rate and stay on that for the term of the mortgage, if he chooses a LTV fixed rate it will be on his offer letter that he can revert to a LTV variable rate or fix again.

    enfant terrible wrote: »
    Did they tell you they revert to a LTV rate? some people were on here recently complaining that KBC put them back on the variable rate.


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