Fixed Mortgage 5 Yr "V" Variable should i Change

hangover_ie_ie

Hi there
Lots of people probably wondering the same thing.
I fixed 10 months ago on an Ulster Bank fixed Rate for 5 years till 2012
Terms
4.95% Fixed Rate till 2012 (APR 5.2%)

My Repayments are 1528.45 after Mortgage Interest relief it comes to 1450.00
There is a 6 month interest penalty to break out of this 5 year.
Is it worth breaking out and am i INSANE to continue in this fixed rate? I currently the mortgage balance is 305,000
Is 6 months interest a huge amount and would you need to pay this penalty up front or would it be added to your mortgage
Any advice welcome

Bren
Drumcondra

Ogham

Going by those figures it looks like you have a 35 year mortgage?
It is possible that you will save money by coming off the fixed rate - but it may not be possible.
With the penalty of 6 months interest on 305k - being around 7.5k .
Ulster have variable rates that are around 6% ! So you would have to move lenders to get a lower rate. If you managed to go onto the lowest variable rate available (3.75%) and even assuming that it drops another 0.5% to 3.25% - your repayments could be about 1216 a month - a saving of about 310 a month. Over the remaining 4 years that would reduce repayments by 14880. So that is an overall poential saving of about 7300
This assumes that a) you are accepted by another lender and b) variable rates stay this low for the next 4 years.

The problem is that value of your house has probably dropped - so a new lender may not be willing to lend you the full 305k now. You could ask (AIB have the lowest rates for higher LTVs or try Halifax too)
If you add the 7.5k to your mortgage - the extra interest payments over 34 years at 3.25% would be about 5k - so reducing even further any potential "savings". (Of course if/when interest rates rise - these figures will change.
Have you tried negotiating on the penalty fee?

hangover_ie_ie

Hi Ogham

Yes it was a 35 year Mortgage ( 31 YRS 8 months left )
I am 3500 in arrears and have been missing payments frequently but allways repay something regularly
You say some variable Ulster Bank rates are 6%. I thought the rates had dropped off to 2% and was missing the boat.
So 5.2% aint that bad then?

Hmmm food for thought !

Bren

Ogham

Yeah - Ulster have not been loweing variable rates as much as the other banks. Their variable rates APR are all over 5.2%
The chances of you moving to another lender if you have arrears are very unlikely - they won't consider you a safe bet.
Just out of interest - why ddi you opt for that fixed rate 10 months ago - were there not ant trackers available then. (I bet it was a broker that "advised" you?)

hangover_ie_ie

Would you belive i was on a tracker......... I just saw the interest rates rising and decided better safe then sorry and fix !
I think i am kicking myself now ! ! ! !