Mortgage Rates

Villain

Ok so if you had the choice between the rates below which would you pick?

1yr fixed = 3.9% = E842/mth
2yr fixed = 4.54% = E927/mth
3yr fixed = 4.70% = E949/mth
ECB tracker = 4.15% = E875/mth

I know they reckon rates go will up .5% before the new year so I think 2 year fixed might be the way to go?

Also can someone explain to me what ECB tracker is?

delly

ECB is the European cental bank rate whihc means it goes in line with it i think.

Yeah the 2yr rate isn't bad, but with there being such a small difference between it and the 3yr rate i'd probably go with the 3yr.

Tazz T

I've been looking at this meself and have decided to plump with a two year fixed. My research says that in all probability interest rates will have peaked by then and there will be a good chance of fixing at a lower rate.

Lex Luthor

I would just go with the 1yr fixed as even if the rates go up, you will probably end up paying less anyway.

AFAIK, the ECB tracker is a variable rate that moves with the ECB rate. Tends to be a fraction less than the variable, but when the ECB rate changes the tracker changes almost within the next day in line with it, but the variable would only change a week later.

Noelie

just FYI BOI are offering a better 2yr fixed rate of 4.4%
http://www.bankofireland.ie/html/gws/personal/buy_house/calcs/General_Content_1000002.html#content

Villain

Cheers for the replys lads, I am aware that other institutions offer better rates but these are the ones available in this case.

antoinolachtnai

Here's my suggestion:

Take the 1-year fixed (which is some sort of special deal, it doesn't make any financial sense given the outlook for interest rates). This is essentially free money from the bank.

In one year's time, go with the variable, which to be pessimistic, might well be 4.9 percent. If it is this high, then your average rate over two years will still be only 4.4 (4.9+3.9/2) percent, which is lower than the two-year rate they are quoting. Even if rates stay at 4.9 for two years, the average will be (3.9+4.9+4.9) = 4.56 percent which is a lot less than what these guys are quoting you for a three-year fixed.

If you are the careful type, then start overpaying into your mortgage while the rates remain low, i.e., increase your payment to as high a level as you can afford (if you are just moving into the house, you probably can't do this in the first year. Also, you can't overpay into a fixed mortgage, so you will have to hang on to the money until the end of the first year). If you overpay like this, you will have the option of scaling back payments later if interest rates go crazy.

Generally speaking, fixed mortgages are bad value. You are paying an extra .2 percent or so for the service of providing a hedge.