Would you fix your mortgage in the current market?

MrsSimba

I know nobody knows what is going to happen in the current climate, but unfortunately my husband doesn't have a clue about finance and I organise it, I don't have much of a clue either!
IIB sent me a letter to give me the option of fixing my mortage at the following options:
Fixed until 1st August 2010 @ 5.85% (6.13% Typical APR)
Fixed until 1st August 2011 @ 5.85% (6.11% Typical APR)
Fixed until 1st August 2013 @ 5.99% (6.16% Typical APR)

What would you do? Also why are there 2 %'s do we pay the 1st or the 2nd one iykwim

loyatemu

i personally would be reluctant to fix ever. You're gambling that you know more about what interests rates are going to do than the bank.

Over a very long term (where no-one really knows anything) you might get lucky, but that's not really a good basis for financial decisions.

Senna

I take it your just coming off a fixed rate and this is new offers, if so i'd just go on the standard variable or find out if a tracker is available. What standard variable did they offer?

Fixed rates are good for FTB's, for the first few years, at least they know what they paid every month and can budget for other costs, related to a new house purchase.

MrsSimba

Thanks for your advice

What standard variable did they offer

It doesn't say on the letter? Should I ring them and ask them and I presume a standard variable will be a percentage figure (sorry I really don't have a clue)

Trampas

MrsSimba wrote: »

I know nobody knows what is going to happen in the current climate, but unfortunately my husband doesn't have a clue about finance and I organise it, I don't have much of a clue either!
IIB sent me a letter to give me the option of fixing my mortage at the following options:
Fixed until 1st August 2010 @ 5.85% (6.13% Typical APR)
Fixed until 1st August 2011 @ 5.85% (6.11% Typical APR)
Fixed until 1st August 2013 @ 5.99% (6.16% Typical APR)

What would you do? Also why are there 2 %'s do we pay the 1st or the 2nd one iykwim

I am with IIB and I got offered 5% fixed until 1st Aug 2010. Not sure if it is to do with the LTV mine is less than 80%

DO0GLE

http://www.rte.ie/business/2008/0814/eurozone.html

stovelid

Fixing isn't always a financial decision. Within reason, some people want to know what they will pay for x number years, and are willing to write off the possible gains of going with a variable rate.

I fixed two years back.

I can easily cover the repayments, and (barring a massive drop in rates) I'm happy enough to know what exactly what I'm paying until the end of the term.

G_unit

The only lender to fix with at the moment are AIB... 3 year fixed at 5.45%

The movement of long term Mortgage fixed rates is always a good indicator of where variable rates are going to go over the short term. As far as I hear, the money markets have already presuming at least two rate drops in the Eurozone during 2009.

If you fix now with IIB I think you'll be cursing yourself this time next year!

TwoShedsJackson

Look at it this way, if IIB didn't think they'd make more money out of you fixing your mortgage rate, they wouldn't offer it.

Pat Mustard

I fixed for a couple of years previously, and I was glad I did, due to the rise in interest rates. Rates look high now, and maybe they will get a little higher before they get lower. My guess (just an educated guess) is that they will fall next year, so maybe either:

1. Fix for one year, for the certainty of knowing what your interest rate is, or,

2. Go variable, expecting interest rates to drop, and then fix for 2 or 3 years, if they drop.

boa-constrictor

loyatemu wrote: »

i personally would be reluctant to fix ever. You're gambling that you know more about what interests rates are going to do than the bank.

TwoShedsJackson wrote: »

Look at it this way, if IIB didn't think they'd make more money out of you fixing your mortgage rate, they wouldn't offer it.

To fix or not to fix is not a battle between you and the bank. The bank don't necessarily make more money because you do or don't fix. If you fix the rate you borrow at, the bank also fixes the rate it sources the capital at (not on an individual mortgage basis but in tranches of funds) - it doesn't lend to you on a 3 year fix of 5.85% in the hope that short term money will stay below this. The banks profit comes from the margin.

Forget about trying to beat the bank - think about your own situation.

The reality is that if you go back over the last however many years data is in existence for (I think its around 80 odd years), people who stayed variable have won out, HOWEVER and its a big however, if your personal situation meant that you simply could not afford an increase in your mortgage repayment in the short/medium term you should fix.

Villa82

I'm about 2weeks away from signing my mortgage. We are not sure what to take. We are going with EBS who have given the below rates. We are either going with the variable or tracker. But to be really honest, I don't really know or understand too much about the tracker. Any help or info is greatly appreciated.

€365,000 over 35 years @ variable 5.88% = € 2,051/month

€365,000 over 35 years @ Tracker 5.69% = € 2,005/month ( Ecb rate + 1.44%)

€365,000 over 35 years @ 1yr fixed 5.70% = € 2,008/month

€365,000 over 35 years @ 2yr fixed 5.99% = € 2,078/month

€365,000 over 35 years @ 3yr fixed 5.79% = € 2,029/month

€365,000 over 35 years @ 5yr fixed 5.63% = € 1.991/month

daheff

I'd be very surprised if interest rates rise again before they fall in Europe. Reason being is that all the big economies in the eurozone are going into a recession (Germany, France...Spain is already there...Italy isnt looking too healthy).

but that said the ECB is only supposed to look at inflation (not growth)...so if inflation remains high then they may increase rates again...(not likely as oil/commodity prices have dropped due to the strength of the dollar).


I wouldnt fix rates now unless you got a phenomenally good rate

Villa82

So really what is the difference getting a standard variable and a tracker? Am I right in assuming that with the standard variable it can go up & down as high/low as rates/mortgage provider amends them. Where as the tracker will only ever (in the case below) go 1.44 below the 5.69 rate and 1.44 above this rate?

365,000 over 35 years @ variable 5.88% = € 2,051/month

365,000 over 35 years @ Tracker 5.69% = € 2,005/month ( Ecb rate + 1.44%)

lynchie

Villa82 wrote: »

So really what is the difference getting a standard variable and a tracker? Am I right in assuming that with the standard variable it can go up & down as high/low as rates/mortgage provider amends them. Where as the tracker will only ever (in the case below) go 1.44 below the 5.69 rate and 1.44 above this rate?

365,000 over 35 years @ variable 5.88% = € 2,051/month

365,000 over 35 years @ Tracker 5.69% = € 2,005/month ( Ecb rate + 1.44%)

Variable can be changed by the bank when they see fit.

Your interpretation of a tracker is wrong. It tracks the ECB rate. In your case by 1.44%. The current ECB rate is 4.25% (4.25+1.44=5.69). So if the ECB rate goes up .25% your new rate will be 4.5 + 1.44 = 5.94%.. Same when it goes down .25%, it will be 4 + 1.44 = 5.44%

astrofool

A tracker is based on the ECB rate of interest, and will always be this rate + a percentage (some lenders might have additional conditions about breaking out of a tracker).

So, current ECB rate is 4.25%. They are adding 1.44% to get 5.69%, if ECB rate goes to 5%, you will pay 6.44%.

A variable tracker can be set at whatever the banks want (although usually they give certain bands).

Villa82

Cheers Lynchie. That's make perfect sense the way you've explained it.

darkskol

fixed last year for 5 years at 4.5% with BOS quite happy with that.

Villa82

I've just noticed something on the back of my approval form now. It reads:

"We (E*S) dtermine that the 1 month EURIBOR rate is more than 0.25% above the ECB rate for a period of greater than 30days, then at our sole discretion we may substitue the 1 month EURIBOR rate for the ECB rate. This means that from a certain date, the interest rate on your Loan wil track the 1 month EURIBOR rate in place of the ECB rate. If we determine that the 1 month EURIBOR rate is less than 0.25% above the ECB rate for a period of greater than 30 days, the tracker interest rate will revert back to tracking the ECB rate."

I was not aware of this until now. Is this one a littler risker? Is the Euribor likely to be greater than the ECB rate most of the time?