Advice Sought on Mortgage Options (Have to go with First Active)

blobert

Hello Folks,

Myself and my partner went to First Active today to get mortgage approval for our affordable house. Because it is through Dublin Docklands First Active are the only bank offering mortgages so we have to use them, which isn't great but there is no other option at the moment.

The two options seem to be fixed (2,3 or 5 years) or tracker mortgages (the loan advisor said the variable rate was a terrible idea). I was just wondering on what the general consensus is at the moment as to which is the better option?

The current rates are:

Residential Fixed Rate
2 Year Fixed 6.6%* APR
3 Year Fixed 6.5%* APR
5 Year Fixed 6.4%* APR

Tracker Variable Mortgages
Residential Trackers < 80% LTV 6.4% APR
Residential Trackers > 80% LTV 6.6% APR

We are taking a loan of €207,000 probably over 25-30 years. Current rent is €1300 a month so we would be looking to pay roughly the same as this including extras.

The loan advisor seemed to be pushing us towards a fixed rate of 3 or 5 years, was just hoping to get a bit of impartial advice on the matter here.

I know it's not possible to predict what's going to happen with the ECB rate but any advice would be much appreciated. My economist friend is out of the country and we need to make a decision in the next few days:)

I'd appreciate any help. Thanks in advance

blobert

Anyone....

We have to decide today!

Thanks

antoinolachtnai

It's all much the same really. If you plan to continue the mortgage for sure for 4 or so years, I'd go with the 5-year deal. Otherwise the 2 or the 3.

I'd go for the three if I was uncertain about the long term plan.

The variables don't look great to me at first face.

All in all I'd go for the 3-year, but I don't know all of your circumstances.

PS: good luck with the house. I hope you are very happy.

mikewest

Good advice from the loan advisor. Three or five year deal. Five year will give you amedium to long term idea of what you will have to pay out and the piece of mind this brings. Worth noting its not as easy to move mortgage holders in the last few months as it was last year for instance but this will probably have changed in 3 to 4 years time again.

Moneyback

Blobert,
207,000 over 25 years on First Active's 5 year fixed rate will cost you around €1400 before tax relief at source. After tax relief your repayment will be less than the €1300 you are comfortable with, so this is manageable.
As it is an affordable house you will not be planning to sell within the next 5 years at least (as you know there is a 20 year clawback on affordable housing) so the penalty for breaking a fixed rate should not apply to you. This would be the main reason I would advise people not to go on a 5 year fixed rate as you don't know if your circumstances will change within those 5 years and if you need to break a five year fixed rates the penalty could be severe.
One thing I have recently noticed about people who fixed over the last 5 years is that have been on a very low rate for the last 5 years maybe 3% but now the fixed rates are over they have to go on tracker or variable rates of 5.25% plus so there has been a huge jump in their repayments. They obviously made the right decision to fix but if they were not ready for the fixed rate ending then it can come as a shock.
Basically the warning I am giving about putting the complete amount on the fixed rate is that in 5 years time, rates could be much higher then they are today (the again they could fall back to where they were 5 years ago!). It's crystal ball gazing really.
Have you looked at the First Active 50:50, this is 50% on a fixed rate and 50% on a variable rate? To be honest I never trust banks own products, there must be more in it for them than the customer!
As for payment protection, it really only protects against redundancy and for 12 months so if you are in stable employment, I would swerve it.

blobert

Thanks folks,

After talking to my economist friend I was leaning towards the tracker option, but it seems the concensus here is against it.

We will not be selling this place for at least about 10 years, probably more, plus with affordable housing I'm not sure if you are allowed change lenders at a later stage.

The bank told us that the ammount we'd save in tax relief would equal the cost of the "extras", this seems like the extras are pretty expensive.

It's a shame First Active are the only lenders involved as their rates seem a lot higher than other lenders.

Any further advice would be much appreciated.


Thanks

starky

blobert wrote: »

Thanks folks,

After talking to my economist friend I was leaning towards the tracker option, but it seems the concensus here is against it.

We will not be selling this place for at least about 10 years, probably more, plus with affordable housing I'm not sure if you are allowed change lenders at a later stage.

The bank told us that the ammount we'd save in tax relief would equal the cost of the "extras", this seems like the extras are pretty expensive.

It's a shame First Active are the only lenders involved as their rates seem a lot higher than other lenders.

Any further advice would be much appreciated.


Thanks

207? so they stuck to their guns in the end with the 92% loan?

astrofool

Having one mortage provider for the AH program should be illegal, and runs counter to what AH is trying to do.

faceman

those rates are ridiculously high! Thats very anti competitive

blobert

Ulster Bank have now also signed up but offer the same, if not higher mortgage rates.

It may be worth waiting in the hope BOI or EBS sign up, I worked out that with their trackers (currently at 5.9%) we are liable to save the best part of €100,000 on interest over the lifetime of the mortgage (could get a 25 year one for the same monthly payment rate as the 30 year one with FA or Ulster Bank).

The problem is nobody knows whether or not the other banks will sign up and we have already been waiting since last November for this apartment...

Thanks for the advice.

Hawkeye4real

Hey Blobert, just a few pointers. UB have only signed up coz they are the same group as First Active (both owned by Royal Bank of Scotland) their mortgage underwriters are even in the same building. Good advice from someone above about fixed rate. Biggest warning would be penalty for early cancel but coz its affordable housing that should not be an issue. Separate issue is the legal side. I think I know which development you are looking at and I have seen a few concerns on the legal side. Suggest you ask your solicitor to have a close look at the contracts. Apparantly you never actually own the property until the end of the term and also there are some issues around uncertaintly of the management fees and a few other things. Just look deep into it all from a legal perspective. Best of luck.