Eddie hobbs' advice on mortgages

mick kk

Eddie Hobbs was on mooney on rte there about two weeks ago. He was advising people to go out and fix their mortgages ASAP as he reckons now is the best time to do this. I found this advice very strange. Surely with interest rates so low, the best place to be is an a variable rate mortgage or to remain in a tracker mortgage (as far as I am aware, those in tracker mortgages are literally laughing all the way to the bank). Anyone an opinion on this... I don't trust him.

Hasschu

A lot depends on how much of an interest rate rise you can absorb comfortably. If you can still pay the mortgage if interest rates triple then you are a good candidate for a VR mortgage. Remember the bank will not call you and say VR are going up by 2% next month and you should lock into a long term fixed rate mortgage now. Also as short term rates go up medium to long term will also go up in tandem. History tells us that we are in an unusual period of low mortgage rates. This low rate climate will come to an end as central banks become more concerned about inflation than they now care about deflation. I cannot see ECB allowing inflation to go over 3% so in the not too distant future rates will rise. The question is will it happen in 6 months, one, two or three years. My own inclination would be to lock in now.

eamonnm79

He is basicly predicting massive interest rate increases.
He might be right.

Raskolnikov

eamonnm79 wrote: »

He is basicly predicting massive interest rate increases.
He might be right.

Not necessarily.

The ECB interest rate does not determine the cost of mortgage borrowing by itself. I think what Eddie is saying is that even if rates stay low (I think they will), is that the cost of borrowing at the interbank rate will rise (more likely than a rate hike at the moment).

eamonnm79

Raskolnikov wrote: »

Not necessarily.

The ECB interest rate does not determine the cost of mortgage borrowing by itself. I think what Eddie is saying is that even if rates stay low (I think they will), is that the cost of borrowing at the interbank rate will rise (more likely than a rate hike at the moment).

I know and I agree that Moves like those of TSB will start happening more and more but that would not be enough to make it worth your while to switch on its own.
I think he is predicting interest rate hikes.

Time Magazine

Moved from the forum that has a big "This is NOT a personal finance forum" sticky

pog it

OP- why not trust Eddie Hobbs? He has no agenda with regards mortgages from what I can imagine!

Lemlin

I've heard an increasing amount of 'financial experts' say that people should stick with a fixed mortgage if possible.

That said, I'm planning to go with a variable as the fixed option of what we want will cost €140 more a month to fix for five years.

I actually had a thread on this topic. Search it under AIB Mortgage Rates.

Toots

I enquired about fixing my mortgage, but I've found a lot of banks are offering very good fixed rates for their new customers, but not so good rates for their existing customers. You'd need to weigh up would the peace of mind be worth the potential extra couple of hundred euro each month.

flanzer

Gonna stick it out for the moment on my tracker and watch the inflation rates

And remember, this is the same Eddie hobbs who was advising to buy in Bulgaria a number of years back. Thanks Eddie, just as well I didn't take your advise on that one!

Drumpot

Cant speak for Hobbs, but personally I have fixed my rate.

Its costing me €200 extra a month.

Fixing is a personal decision and its a gamble either way whether or not you fix or remain variable.

I work with my father, we are both financial advisers and have a difference of opinion on this topic. But we both acknowledge the merits of going one way or the other.

I prefer to know exactly where I stand on my mortgage. I believe that the TSB increase of .5% will be passed on by all other mortgage lenders sooner or later (certainly within the next year).

This is the main reason I have fixed. I have advised my friends to consider fixing. But like mentioned here, if you can afford huge increases in the interest rates, it is possibly worth a gamble, as there is no guarantee that rates will increase soon, or that the banks will raise their own rates.

I presume Hobbs didnt just tell all people to fix as this is a very irresponsible statement. Its like saying people should invest in "x" irrespective of their risk portfolio. There are always personal circumstances to consider when making financial decisions as the shoe does not fit all . .

buck65

I have a tracker mortgage and it seems anyone on a tracker should stay put as the banks are losing money on these style of mortgages. The tracker usually stays within 1% of the ECB rate so the rate would have to go to 3.5% for me to have had value in fixing my mortgage.
It is unlikely that this will happen for a couple of years surely? I reckon I'll keep my €400 a month this year anyway.

Drumpot

buck65 wrote: »

I have a tracker mortgage and it seems anyone on a tracker should stay put as the banks are losing money on these style of mortgages. The tracker usually stays within 1% of the ECB rate so the rate would have to go to 3.5% for me to have had value in fixing my mortgage.
It is unlikely that this will happen for a couple of years surely? I reckon I'll keep my €400 a month this year anyway.

A tracker is a totally different beast.

Theres no reason to fix a tracker unless you think that interest rates are going to rocket and remain high.

eman66

My broker has said that I would be crazy to fix for 5 years as a new customer. He's an experienced broker and is saying the opposite to most commentators. He says I should fix now for 1 year (lower rate than standard variable) and wait and see what happens. If and when rates do rise surely the fixed rate will rise pro rata. I have to decide in the next days and I'm confused, to say the least.

greendom

Well the fact is rates can't get much lower, so you're not really going to lose out

eden_my_ass

buck65 wrote: »

I have a tracker mortgage and it seems anyone on a tracker should stay put as the banks are losing money on these style of mortgages. The tracker usually stays within 1% of the ECB rate so the rate would have to go to 3.5% for me to have had value in fixing my mortgage.
It is unlikely that this will happen for a couple of years surely? I reckon I'll keep my €400 a month this year anyway.

Isn't the risk here that by the time you decide 3.5% is pushing your tracker rate too high, the fixed rate at that time will then be significantly more and impossible to move to? Hence the argument to fix now, possibly losing for a while against your tracker, but then gaining for longer...I'm on a tracker too at the moment and its becoming more a question of the devil I know, as suggested above if the fixed rate looks affordable for me for the next 5 years it might be the safest option to lock in. But I'm not decided yet, its a quagmire!

Sand Wedge

I am on a tracker and very happy with the rate that i am on at the moment. I am on locked into 1% above ECB.

In my opinion my tracker rate would not cost as much as fixed rate for another 2 years. (i.e rates go up by 2-2.5%).

So instead of paying the extra interest on the fixed rate for next 2 years, work out the extra that fixed rate would cost now and make additional payments into your current tracker now that will equal the cost of the fixed rate.

This way you are paying extra off your capital amount each month and if you decide in future that you want fixed then you will have less of mortgage to pay off.

This is just my opinion.

Drumpot

eman66 wrote: »

My broker has said that I would be crazy to fix for 5 years as a new customer. He's an experienced broker and is saying the opposite to most commentators. He says I should fix now for 1 year (lower rate than standard variable) and wait and see what happens. If and when rates do rise surely the fixed rate will rise pro rata. I have to decide in the next days and I'm confused, to say the least.

Its a very tough personal decision to make, theres no "one answer fits all" for everybody..

Alot of people are loath to go long term Fixing. Indeed, if a couple of rate hikes wont really affect you financially, then it may very well be worth the risk of remaining on variable.

The logic of going 1 year fixed is debatable. If everybodys in agreement that rates will be up by this time next year, I dont really see the advantage of fixing for a year so you can pay more when you come off it! You are better off remaining on the variable if thats the case (This is a matter of opinion by the way, Im sure your broker has good reasons to advise this).

I believe it is important to weigh up peoples personal circumstances.

Can you afford rate increases ? Can you afford not to know what your mortgage repayments will be ? Can you afford to risk rate increases ?

I went fixed because I need and prefer the transparency in my Mortgage repayments.

Its really an educated guess as to whether or not you should fix for 5 years or not (and dependent on the rate being offered).

At the moment I was offered 3.99 fixed for 3 years from my Mortgage company and 3.24 variable.

I happen to believe that mortgage companies will up their rates (like TSB) in the next 6 months. I also believe that in the next year the ECB rates will of gone up.

I have fixed and am paying a €200 a month premium for this "peace of mind". If rates remain the same and/or mortgage companies do not raise their own rates, I will of paid the premium for being able to budget the next 3 years. I might end up paying more, but for peace of mind, I believe for me personally , its worth it.

These are my personal opinions, not financial advice. I would advise you discuss this further with your broker who should be able to give you a clearer indication on the motives of their advice.

eman66

Thanks a million for your opinon. Very helpful.

Drumpot

eman66 wrote: »

Thanks a million for your opinon. Very helpful.

Your welcome . . Good luck with your decision . . .

eman66

Is it not likely that, although rises are said to be inevitable, these rises cannot be so steep as to derail a recovery? So, were I to fix for 5 years, my concern is that I may come to the end of the fixed period as we hit the steepest rises. This would defeat one of the main reasons for fixing.

The other option, a 10-year fixed rate, is too expensive.

Edit:
Would anyone think that there is still time to squeeze a last year out of the low variable rates or to take a 1-year fixed teaser (currently lower than the SV), before fixing for the medium/long term? I know it's crystal ball stuff...

mollyoh

Still on subject but I just got a letter from my mortgage provider offering me a decision to change from my fixed rate mortgage (4.50%) to a tracker which is currently ECB plus 1.5% (2.15%) Now I reckon i would be mad not to take them up on this offer cause i only fixed last year for 3 years...now I agree the rates will probably go up but I think i might be safe (and save 300-400 a month) for a good while before or if they reach 4.5% again. ANY OPINIONS?????

The Rooster

mollyoh wrote: »

Still on subject but I just got a letter from my mortgage provider offering me a decision to change from my fixed rate mortgage (4.50%) to a tracker which is currently ECB plus 1.5% (2.15%) Now I reckon i would be mad not to take them up on this offer cause i only fixed last year for 3 years...now I agree the rates will probably go up but I think i might be safe (and save 300-400 a month) for a good while before or if they reach 4.5% again. ANY OPINIONS?????

Who is your mortgage provider?

Very good of them to offer you a deal that saves you and costs them!!?? Or are they charging a big breakage fee or admin fee for breaking the fixed mortgage and starting a new one?

2 years left at 4.5% versus a tracker at 2.15% is a no brainer (unless you're being hit with big fees). Interest rates would have to rise hugely in that timeframe for you to lose out - highly unlikely to rise to that degree that soon.

weirdear

If you lodge the 300 - 400 euro savings in your Mortgage Account you could also chip away at the outstanding Capital. Over a 1 - 2 year period this could be as much as €10,000..... You could reduce your mortgage by 1.5 yrs.

TERRIC

Thinking of switching to fixed rate but currently on a variable of just 2.63%. EBS may have to raise their variable rates like PTB did and spoke them to see what they can offer. The best they can offer me as of this coming friday when they're dropping their fixed rates slightly is:

4% for 3 years
4.6% for 5 years
4.95% for 10 years

I know it's all a gamble and crystal ball stuff but just wondering - what would you do??

Toots

Nobody here can really advise you whether to fix or stay variable, as each option will not suit everyone. At the moment, it's better for some people to stay variable, but others may be better off fixing. Will EBS let you split it half fixed and half variable?

MatureStudent

Don't know if they still do, but EBS let me split my mortgage a few years ago, didn't have to be half/half, I decided how much at each rate. They just set up a second account and transferred some of the balance to it.

Dopey

The banks obviously want to make the maximum amount of money possible.

If they offer a fix rate of say 4% then they expect the ECB and interbank rate to be sufficiently below that. They are gambling too but they have the "smart" dudes employed to predict it.

OK, maybe they are not that smart.

loyatemu

Dopey wrote: »

The bank's obviously want to make the maximum amount of money possible.

If they offer a fix rate of say 4% then they expect the ECB and interbank rate to be well below that. They are gambling too but they have the "smart" dudes employed to predict it.

OK, maybe they are not that smart.

aye - my attitude to fixing has always been that you are betting you know more about long term interest rates than the bank. You might get lucky, but most of the time I think it will end up costing you more - but maybe thats worth it for the certainty of knowing what your payments are going to be (it hasn't proven to be much of a comfort for all the people ringing Joe Duffy about the astronomical escape fees the banks charge though).

eman66

For those who have borrowed over the past few years of historically low interest rates, under 3%, surely fixing would protect against the much speculated rate rises to come. How much would your repayments increase if rates were to rise to 6-8%. At 6%, mine would rise by nearly €600pm. Scary.

Ideo

eman66 wrote: »

How much would your repayments increase if rates were to rise to 6-8%.

Do you really think rates are going to increase to 6-8%?!