Breaking a 5 yr fixed Mortgage, need advise

dmcevoy

My mortgage ran out last October and I went to a mortgage broker to find the best deal. I was advised to Fix as at that stage the interest rates were going up weekly. I fixed for 5 years on their advise over 25 years and now I see that advise was really poor. Anyway, I contacted my bank and asked them how much to break and they have come back with a valuation of just under €13K.

I am planning to stay with the same lenders but either go fixed or drop to a 2 year fixed but I definitely do not want to give them €13K. Anyone out there got advise as to what to do. I have not spoken to them but plan too. Has anyone been through the same situation and got a positive outcome or is there any banking people out there who can direct myself as to what steps to take.

niceirishfella

Move lender completely........... why stay with your current one?
The sunday indo reported last sunday that AIB do the best variable rate mortgage, and the worst in the marketplace is Bank of Scotland (ireland).
It also reported AIB to be the best value for a 2 year fixed and 3 year fixed mortgage product.
Explore the options including a move to a new provider. It'll cost you nothing to look - and could $ave you a shed load of €'s!

seamus

Ugh. Banks and brokers can be bastards about this. A guy told me about his experience in the early 90's (maybe late 80's); The mortgage rates of 20-ish% were dropping slightly and his bank manager came to him and offered him a ten-year fixed rate of 10%. With rates at that point sitting on or near 14%, he took the bank manager's arm off. Within 12 months, the rates had dropped to 7 or 8%. Nice.

What you need to look at is how much you could save by switching to a variable rate or even a lower and shorter fixed rate. If you'll save more than €13k, then why not switch? Don't ask the bank what to do - they want you to take the most expensive product. Do your own legwork and sums.

dmcevoy

Thanks for the feedback: The Bank I am with is the AIB, and that is why I want to try to stay with these. I do not know if they will negotiate the costs if I am staying with them or if any other banks will help encore the costs for getting business in?

IsThatSo?

They may negotiate rather than lose the business, put a bit of pressure on and see what happens. (They don't need to know that you don't actually want to move !!!)

However they are well within their rights to insist on the full breakage fee. You did sign a contract. I would imagine that banks are fed up at this stage by the number of people wanting to break out of fixed mortgages, there are loads of threads here about here even.

niceirishfella

dmcevoy wrote: »

Thanks for the feedback: The Bank I am with is the AIB, and that is why I want to try to stay with these. I do not know if they will negotiate the costs if I am staying with them or if any other banks will help encore the costs for getting business in?

right, so you're with AIB.
You keep saying you want to stay with the same lender? Why do you want to stay with them? Got shares there OP?

dmcevoy

The only reason I would want to stay with them is that they have the best rate. They may be flexible if they know they are not loosing a customer, but to be honest I don't think they would care the way the banking system is going at the moment.

niceirishfella

yeah, good Point dmcevoy.
But the rate is not good for you locked into this arrangment with them.
As someone else said here, do you homework, do up an simple excel speadsheet of the offers out there after hyou have contacted each provider and then go back to them and haggle hard.
Thats the best you can do for yourself.

dotsman

niceirishfella wrote: »

right, so you're with AIB.
You keep saying you want to stay with the same lender? Why do you want to stay with them? Got shares there OP?

niceirishfella wrote: »

yeah, good Point dmcevoy.
But the rate is not good for you locked into this arrangment with them.
As someone else said here, do you homework, do up an simple excel speadsheet of the offers out there after hyou have contacted each provider and then go back to them and haggle hard.
Thats the best you can do for yourself.

You don't seem to understand how breakage fees work! He definitely has to pay the breakage fee if he leave's AIB! The breakage fee is spelled out in the contract he signed. He want's to stay with AIB because he wants to get onto their cheap variable rate. It's his mortgage broker who screwed him over, not the bank. By staying with them, he's hoping they will reduce the breakage fee.

OP, it's very simple. You need to work out how much you will save by moving to the variable rate. You don't say what rate you are fixed on, but AIB's variable is currently 3.25%, so I'd imagine there is a significant saving. If you will save the 13K over the next few years, then definitely go for it. If you don't have the funds, can you tack the 13 onto the principle(again working out if this will still save you money over the next few years)?

As for your mortgage broker, do you have their recommendation in writing? That kind of advice was ridiculous. Last October, every dog in the street knew that interest rates were going to plummet. You may have a case for the Joe (but I can't say for sure, as I'm not aware of a case such as this going before him before - you can look through the published case studies). You would need to lodge a complaint with the broker before bringing it to the ombudsman

Ogham

In October 2008 the ECB started cutting rates - they announced a cut of 0.5% on Oct 8th see http://mortgages.blogs.ie/2008/10/08/emergency-ecb-rate-cut-today/
If your broker advised you to fix because rates were "rising weekly" - he was lying or incompetent . I am sure there are honest and competent brokers out there - but I am afraid many of them are after the best rate of commission they can get for themselves.
I would make a complaint and threaten to go to the financial regulator and/or financial ombudsman. (Not sure if the Financial regulator will be much cop - look at how well they kept tabs on Anglo Irish).
The broker should have given you a written explanation of why he/she was recommending that mortgage with reasons why. Take it as far as you can.
What fixed rate are you on?

niceirishfella

dotsman wrote: »

You don't seem to understand how breakage fees work! He definitely has to pay the breakage fee if he leave's AIB!

Yes, I do Dotsman (i've a few mortages going:D), But in order to have all the info to hand when dealing with AIB on a breakage charge, the OP needs to have all the knowledge as knowledge is king and will give power and leverage to do the best deal possible.
The needs to know -
1.what the charges are going to be whatever he does with his existing lender
2. what a new provider can offer.
3. The charges to move over.
4. The hassles of moving over.

The whole lot, not just the AIB info.
Best of luck anyways OP. I'm jusr glad i'm on a tracker meself.

dotsman

But were you not saying that AIB are the cheapest on the market?

By default, that means that the best deal he can get is to stay with them (as the breakage fee has nothing to do with him leaving AIB, just leaving his current rate). Leaving AIB would only entail further expense and hassle as well as leave him on a higher rate?