Fixed vs Variable Rate Mortgages

muletide

Hi,

Just wanted to get a few opinions on this. Currently I am on a variable rate mortgage at 5.28% I have an offer from my provider of a three or five year fixed rate mortgage at 5.00%. I am planning on taking it up as all the talk is of further rate hikes over the next year.

What do people think - should I stay or should I go

sofireland

Depends on personal preference really.
But the rate your being offered is quite good.
Most variables are ECB + 1.25% maybe less, so you'd be fixing at a lower price for a few years.

Blackjack

As a matter of interest, who is the provider?.

Prenderb

That sounds competitive alright, but ask yourself are you going to stay in the house for 3 or 5 years? If you don't and then redeem the mortgage, there'll be penalty clauses. I find it hard to believe you're being offered the same 5.0% rate for 3 and 5 years - check that out. Also, make sure you're comparing APR rates, as sometimes banks quote you rates another way, making them sound cheaper, but they're required to tell you the APR so that you can compare against other products.

I'm not a qualified financial advisor. I'm not regulated by the Financial Services Regulatory Authority. The foregoing is personally held belief and may be wrong. Check with your own financial advisor.

muletide

First Active

sofireland

Sounds about right, their new business 5 yr fixed is something like 4.89%
As the other guys said, if you don't plan on selling within the period, fix it, because that rate is very good value in my opinion

Tom Dunne

That actually looks very good. Might consider switching myself and fixing in for the five years.

McSpud

A lot of the 3 year fixed rates look very similar to tracker rates now. 5 years a bit higher.

I've always stayed away from fixed rate as I assume the banks can judge what the rate will be better than me so no use trying to beat them. Fixed rates seemed to be only worthwhile if need the security...?

Poncherello

Thats a good offer and you should take it on if you have no intention of selling over the period of the fixed term.
FYI I just re-mortgaged with permenant TSB on a ECB Tracker +.6% Yr 1, +.8% Yr2

Chipboard

McSpud wrote:

I've always stayed away from fixed rate as I assume the banks can judge what the rate will be better than me so no use trying to beat them. Fixed rates seemed to be only worthwhile if need the security...?

I've come across a similar comment previously. For clarification, its not about beating them. If you fix and rates go through the roof you gain. I think that you are assuming from this that if you win the bank loses - this is not the case. If 100 customers draw down their mortgages this monday and all of them fix for 5 years and they each have a mortgage of €100k the Banks Treasury Divison goes to the market on monday and borrow €10m at the 5 year rate. They are not gambling on movements in the rate and they dont need you to lose for them to win. The banks profit is the margin on the loan.

Its a win win situation not a win lose (unless rates go down in which case its an opportunity loss for you. It makes no difference to the bank what happens after they fix the rate for you.

Contrary to popular belief, banks don't take risks (not what you would call real risks). Making money in banking is as sure as death or taxes.

stepbar

muletide wrote:

Hi,

Just wanted to get a few opinions on this. Currently I am on a variable rate mortgage at 5.28% I have an offer from my provider of a three or five year fixed rate mortgage at 5.00%. I am planning on taking it up as all the talk is of further rate hikes over the next year.

What do people think - should I stay or should I go

Before you do anything, go to your bank and tell them that you have an offer from First Active. Ask them can they match it. If not by all means move. In the majority of cases they will try to match the opposition.