Any sense in considering moving from SVR to Fixed Rate?

NIMAN

Like all AIB SVR Mortgage customers I have just seen 2 rises of 0.5% in the last 3 months.

My new rate in November will be 4.04%, and I am sure that this isn't the last rate rise from AIB.

Their fixed rates are currently:
2yr : 4.65%
3yr : 4.88%
4yr : 5.15%
5yr : 5.35%

Couple of questions.
1) Do you think there would be any sense in considering moving to a fixed rate?
2) Do they charge a fee to move to a fixed rate?

Idbatterim

what is your standard variable rate? any how many years left to run?

Lambsbread

I am in the same boat - SVR with AIB. I am tempted to take the 2 year fixed at 4.65% but I am not sure that SVR rates will increase about that in the time to make it worthwhile.

I am pretty sure that the banks set their fixed rates up so they will not lose money on them. Hard to see the ECB start to increase rates anytime soon with the debt crisis around Europe.

The main advantage of the fixed rate is stability of payments for the next few years but another 0.65 point increase is pretty hefty so soon after a 0.5 point rise.

tony81

NIMAN wrote: »

My new rate in November will be 4.04%, and I am sure that this isn't the last rate rise from AIB.

ECB is currently 0.75%. It's unlikely to increase in the next 2-3 years, and may actually be cut to 0.5%.

However, ECB is not your only threat.

As banks continue to make losses on trackers (something that will be worsened if rates are cut to 0.5%) they will pile the misery on variable rate customers. And when banks start counting the costs of toxic mortgages, they will attempt to take this out on variable rate customers too.

Banks need a certain amount in reserves. This is cash in deposit accounts and income from performing loans.

When people's houses are repossessed, banks take the hit and their reserves fall (because a loan they thought they would receive €200k for, they actually only receive the knock-down selling price of the house).

Therefore, to bolster their reserves they offer higher savings rates to customers. How do they offer 3 or 4% when the ECB rate is a measly 0.75% (this is not the rate banks receive for borrowing money!)? Therefore, variable rate mortgage holders are hit with interest rates of 5-6%

As a PTSB customer I'd point out that only a year ago they had their variable rate up at 6.15% for some customers (6.05% for me). At the time they were offered a savings rate of 4%.

It is a balancing act for banks, as the higher the rate the more likely it is people can't repay and therefore the more likely more loans will be impaired. In fact of all the banks, PTSB had the highest rate and the highest amount of mortgages in arrears.

If you want stability, fix at 5.35% for 5 years. It's not a bad rate as it's likely the banks will increase their fixed rate soon, therefore you're getting a bargain. Think of the difference in interest rates as a fee for peace of mind (after all, the bank need to charge a higher rate to reflect their risk of interest rates rising).

On the other hand..

If you can afford to pay the higher rate, why not stay on variable and pay a higher monthly amount as if you fixed? You will save a lot of money in interest payments over the course of 5 years (and indeed your remaining mortgage), and all the better if interest rates remain below 5.35%.

StillWaters

They are not bad fixed rates considering how exposed SVR customers are. However, if it were me, and I had a comfort buffer, I would take the gamble and stay variable whilst overpaying.

If I didn't have a comfort buffer I would fix for 5 years.