Fixed interest rate 'offer' from the bank.

podge018

Received a letter from our mortgage provider re. fixing the interest rate on our mortgage account.

Current interest rate 4.20% - Typical APR 4.28% - Repayment €931.09

Various options offered:

Fix for 5 years - 4.19% - Typical APR 5.05% - Repayment €930.06
Fix for 3 years - 4.15% - Typical APR 4.74% - Repayment €925.93
Fix for 2 years - 4.10% - Typical APR 4.63% - Repayment €920.79

I'm pretty clueless on this sort of thing. Can anybody explain how the Typical APR increases so dramatically with a reduction in the interest rate.

What's the outlook for interest rates over the next few years?

I reckon if they're offering me this it can't be for my benefit anyway.

loyatemu

which bank? and what is your loan-to-value ratio (roughly)?

generally with fixed rates, your taking a bet against the bank. I'd generally assume the bank know more about this stuff than I do, so I'd be reluctant to fix, and certainly not for 5 years.

podge018

Bank - KBC.

LTV - 75%-ish

matrim

Those rates seem high compared to the rates offered on the KBC website

MarkAnthony

The APR has to include Fees etc, so I suspect that's why the APR increases over the shorter terms. I'm open to correction I tend to ignore APR.

I'm not sure fixed rates are a good idea at the moment, variables tend to be a lower rate and there's pressure to reduce them in Ireland. I suspect fixed rate holders will be ignored if this ever happens as they chose to fix that rate.

Michael D Not Higgins

matrim wrote: »

Those rates seem high compared to the rates offered on the KBC website

KBC have lower rates for new customers. The ones quoted by the OP are for existing customers.

the groutch

podge018 wrote: »

I reckon if they're offering me this it can't be for my benefit anyway.

that's it in a nutshell.
most banks have their variable rate below 4% already, and KBC will likely have to do the same to remain competitive.
all it takes is one rate drop and you'll be losing money for the rest of the fixed period.

loyatemu

APR is meaningless with fixed rates.

Have you considered switching? - you could get 3.7% variable or 3.35% fixed for 3 years from Ulster Bank, with the bank covering your legal fees.

MarkAnthony

My rate with KBC is sub 4% as a new (last year) punter with the current account, for comparison.

farrerg

Don't think fixing is a good idea at present, ECB still in easing mode so rates are unlikely to go up anytime soon and as other poster said, banks here have been under pressure to reduce rates

you should say you'll switch if they don't give you the same rates as on offer to new customers.
I think a 3 year fix with UB is 3.35%, big difference there

SarahMollie

Those seem high for fixed rates.

I fixed with BOI last year at 3.6% (LTV 55%) for 3 years because;

-I wanted some certainty in the first few years of my mortgage
-The 3 year rate was the better than 1,2,4,5 years so BOI must have considered it the sweet spot.

I'm planning on staying with BOI for the first 5 years as I don't want to pay back the 2% offer, but after that I'll be looking out for the best value. I probably won't fix again unless I get a very good offer.

I'd shop around if I were you.

beauf

podge018 wrote: »

...I reckon if they're offering me this it can't be for my benefit anyway.

Those aren't the best rates available. Shop around.

Some would suggest rates will fall further. That said they haven't yet. Its really a calculated gamble.

I don't think you'll be losing that much if you fix for a year, if there is a drop. Fixing is really to try and beat the variable rate. Or you want surety of repayment.

Fian

loyatemu wrote: »

which bank? and what is your loan-to-value ratio (roughly)?

generally with fixed rates, your taking a bet against the bank. I'd generally assume the bank know more about this stuff than I do, so I'd be reluctant to fix, and certainly not for 5 years.

Fixing is not really a bet against the bank. It allows the bank to securitise the income over the fixed period and also allows them to fund their loans (collectively) in the bond market without any risk of a cost of carry - they don't have to worry that they might borrow money only to find that their existing loans are paid back/refinanced so that they are sitting on idle money.

There are benefits for the bank in persuading you to fix your rate. this does not mean that this is a disadvantage for you - it is not necessarily a zero sum game. A benefit for the bank does not always mean a loss for the customer.

The bank can share some of the benefits with the customer to incentivise them to fix so that both the bank and the customer can be better off. Incentives are pretty limited at the moment since the benefits to the banks are not huge in the current markets.

Don't fix if you might be in a position to make prepayments or may want to move your mortgage/home/sell during the fixed period. And it is not likely that interest rates will rise in the near term, so no strong reason to "fix while you can." for myself i am remaining on a variable rate.

beauf

or if the fixed rate is cheaper then the variable.

MarkAnthony

beauf wrote: »

or if the fixed rate is cheaper then the variable.

Which kinda indicates where the market is going. I'd never seen a cheaper fixed than variable until recently.

newacc2015

IMO if the bank are going to push a fixed rate. Then they might be considering cutting the variable rate in the next few months or cut their fixed rate. There is a new company going to be offering mortgages when they get approvals who are promising to offer the cheapest rate.

There is no risk of the ECB hitting hikes. So I see no point fixing to avoid a non-existant interest rate hike

SeanPuddin_

You must remember that when you leave a fixed rate term you are put on SVR or fix again. Usually LTV rates only apply for new customers.

To expand on that. Ask what rates are available to someone leaving a fixed term today. Then do the maths. If the LTV discounted rates are unavailable to new customers you'll either change to SVR or pick a new fixed rate.

I did the number on Ulster Banks 3.35% fixed ages ago and found I'd be paying 12k more over the lifetime of the mortgage due to being stuck on SVR. They don't explain this to you unless you ask I found.

D_D

Just wondering if I can get your opinions on the following offer from the bank:

Currently have a LTV of 49% (according to BOI), got the mortgage 3 years ago and have been on a variable rate of 4.3%. This hasn't changed in the 3 years I have been on it, up or down. I rang BOI about getting a better rate and when the woman looked at my account, she said 'I see you have a LTV of 49% now so I can issue you better rates, just choose one and send the forms back in'.

According to the letter, they have offered me only fixed rates. These are:

1 year fixed - 3.40%
2 year fixed - 3.35%
3 year fixed - 3.45%
4 year fixed - 3.45%
5 year fixed - 4.20%

The two year fixed is the one I'm looking at. But my queries are:

1) Is it odd that the fixed rates are much lower than my variable rate which has never changed in 3 years?
2) If I choose the fix rate, what are the consequences after two years? Can I choose to go back onto a variable rate? I like the idea of overpaying once I am in a better standing financially in two years time.

Cheers!

matrim

D_D wrote: »

Just wondering if I can get your opinions on the following offer from the bank:

Currently have a LTV of 49% (according to BOI), got the mortgage 3 years ago and have been on a variable rate of 4.3%. This hasn't changed in the 3 years I have been on it, up or down. I rang BOI about getting a better rate and when the woman looked at my account, she said 'I see you have a LTV of 49% now so I can issue you better rates, just choose one and send the forms back in'.

According to the letter, they have offered me only fixed rates. These are:

1 year fixed - 3.40%
2 year fixed - 3.35%
3 year fixed - 3.45%
4 year fixed - 3.45%
5 year fixed - 4.20%

The two year fixed is the one I'm looking at. But my queries are:

1) Is it odd that the fixed rates are much lower than my variable rate which has never changed in 3 years?
2) If I choose the fix rate, what are the consequences after two years? Can I choose to go back onto a variable rate? I like the idea of overpaying once I am in a better standing financially in two years time.

Cheers!

Why not look at other banks? A quick glance at Ulster shows you may be able to get 3.5% variable or 3.25% on a 2 year fixed.

D_D

matrim wrote: »

Why not look at other banks? A quick glance at Ulster shows you may be able to get 3.5% variable or 3.25% on a 2 year fixed.

I don't think I am ready and willing to go through the hassle of switching mortgages and banks just yet. Maybe in the future, but for the minute the difference between 3.35% and 3.25% is equivalent to €6 per month.

SarahMollie

Well I suppose the new low fixed rate is because you now own more than 50% of your house so you're in a lower risk bracket.

And yes, once you finish the 2 year term, it reverts to variable unless you choose to fix again.

I've done something similar (fix for 3 years, started about 6 months ago) as this is the start of my mortgage and I wanted certainty at the outset, but I'm currently overpaying by 10% as allowed by BOI during my fixed period and hope to have a lump sum to knock off once my fixed period ends. Then I'll look again at all the options.

D_D

SarahMollie wrote: »

Well I suppose the new low fixed rate is because you now own more than 50% of your house so you're in a lower risk bracket.

And yes, once you finish the 2 year term, it reverts to variable unless you choose to fix again.

I've done something similar (fix for 3 years, started about 6 months ago) as this is the start of my mortgage and I wanted certainty at the outset, but I'm currently overpaying by 10% as allowed by BOI during my fixed period and hope to have a lump sum to knock off once my fixed period ends. Then I'll look again at all the options.

That's interesting that you're overpaying by 10% on your fixed rate mortgage. If I reduce down from 4.3% variable to 3.35% fixed, and overpay by 10%, I will be paying just under what I am paying now except I will be overpaying.

I might give them a call to see if I can overpay by 10% if I choose to fix.

Thanks.

SarahMollie

D_D wrote: »

That's interesting that you're overpaying by 10% on your fixed rate mortgage. If I reduce down from 4.3% variable to 3.35% fixed, and overpay by 10%, I will be paying just under what I am paying now except I will be overpaying.

I might give them a call to see if I can overpay by 10% if I choose to fix.

Thanks.

Yeah definitely do that.

they sent me some "did you know" pamphlet with my first interest statement and it told me about over paying in your fixed term. I rang up and gave the instruction, it was really easy, and they just sent me out confirmation in the post afterwards.

iainBB

Be very careful of fixing right now. Ulster bank for example are offering low fixed rate for 1,3, or 5 years but after that the have a very high var rate that you will default back on I think its 4.5

If your circumstances change ie. new job, reduce income, kids you will find it difficult to switch again and be stuck with the high var rate after the fixed period until the end of the mortgage term.

there is a discussion on it here also:
http://www.boards.ie/vbulletin/showthread.php?t=2057588040

D_D

iainBB wrote: »

Be very careful of fixing right now. Ulster bank for example are offering low fixed rate for 1,3, or 5 years but after that the have a very high var rate that you will default back on I think its 4.5

If your circumstances change ie. new job, reduce income, kids you will find it difficult to switch again and be stuck with the high var rate after the fixed period until the end of the mortgage term.

there is a discussion on it here also:
http://www.boards.ie/vbulletin/showthread.php?t=2057588040

Just read that thread, thanks.

So reading between the lines, fixing for two years for a short gain may end up costing me more in the long run if I am put on a higher variable rate at the end of the two years.

But with BOI, I am currently on the variable rate of 4.3%. As it is expected that the rates will reduce for the foreseeable future, do BOI pass these rate reductions onto their customers? In my first three years, I've seen no reduction (granted, no increase either).

Does anyone know what standard variable rate is currently once people are out of a fixed rate term?

SarahMollie

D_D wrote: »

Just read that thread, thanks.

So reading between the lines, fixing for two years for a short gain may end up costing me more in the long run if I am put on a higher variable rate at the end of the two years.

But with BOI, I am currently on the variable rate of 4.3%. As it is expected that the rates will reduce for the foreseeable future, do BOI pass these rate reductions onto their customers? In my first three years, I've seen no reduction (granted, no increase either).

Does anyone know what standard variable rate is currently once people are out of a fixed rate term?

This doesnt make sense to me. I've always been told that I will be on whatever the variable rate is at the time, once my fixed period is over.

It doesnt make sense for the banks to put customers exiting fixed periods punitive variables as customers have the option to move their mortgages to another lender if their rates are better.

I'd put the question straight to BOI, but I don't believe the assertion above.

Also, there isnt just one Variable Rate. There are multiple rates depending on your LTV.

D_D

SarahMollie wrote: »

This doesnt make sense to me. I've always been told that I will be on whatever the variable rate is at the time, once my fixed period is over.

It doesnt make sense for the banks to put customers exiting fixed periods punitive variables as customers have the option to move their mortgages to another lender if their rates are better.

I'd put the question straight to BOI, but I don't believe the assertion above.

Also, there isnt just one Variable Rate. There are multiple rates depending on your LTV.

Well that's what im confused about. I am currently on the standard variable rate, with an offer to go below that rate for the next two years. After two years, I'll just go back onto the standard variable rate available at that time, which looks to only reduce over the next while?

Am I missing something, or is there a list of variable rates somewhere that are completely different to the rates available at the minute?

beauf

On the one hand bank might want to lock people into a fixed rate, so they can't switch to another bank if one comes along with much lower rates in the next two years. Why the longer fixed rated aren't as good I don't know. Unless its simply the rate the bank got on the funds itself. Maybe it only has a cheap rate for 2~3yrs. Maybe they want to get maximum from the variable rate for those that don't switch. Theres a lot of ifs and maybes.

iainBB

beauf wrote: »

There is a lot of ifs and maybes.

There is a lot to consider here. and your circumstances need to be taken into account. fixing may suit you but not others.

I am at LTV of below 60% have 24 years left in mortgage rate of 3.9% var . .

got an offer of 3.25% fixed from bank we are going to wait for a few months to see what lower rates comes out and make a long term decisions then.
We have kids now and different income so much harder to move mortgage around then it was when we started.

D_D

beauf wrote: »

On the one hand bank might want to lock people into a fixed rate, so they can't switch to another bank if one comes along with much lower rates in the next two years. Why the longer fixed rated aren't as good I don't know. Unless its simply the rate the bank got on the funds itself. Maybe it only has a cheap rate for 2~3yrs. Maybe they want to get maximum from the variable rate for those that don't switch. Theres a lot of ifs and maybes.

I just rang through to the mortgage department. They confirmed that after two years of fixing, I will be able to go onto the variable rate associated with my LTV rate at that time. So if this foreseen to only drop, worst case is I go back to the rate I am currently on.

The other thing in my favour is that I am currently on the variable rate associated with an LTV >60% and <80%. I technically should be on the variable rate associated with <60%. So in two years time, after the period of fixing the rate, the variable rate could be </= 3.9%, the variable rate associated to a LTV <60%.

I think I'll go for it.

iainBB

D_D wrote: »

I just rang through to the mortgage department. They confirmed that after two years of fixing, I will be able to go onto the variable rate associated with my LTV rate at that time. So if this foreseen to only drop, worst case is I go back to the rate I am currently on.

The other thing in my favour is that I am currently on the variable rate associated with an LTV >60% and <80%. I technically should be on the variable rate associated with <60%. So in two years time, after the period of fixing the rate, the variable rate could be </= 3.9%, the variable rate associated to a LTV <60%.

I think I'll go for it.

Hold on a few months mate. There is no rush any time soon when you dealing with 30 year investment a a few months won't make much of a difference.

SarahMollie

iainBB wrote: »

agreed
that is reason why the letter are in your door from the bank about fixing your mortgage now. ( its marketing department looking for suckers )
get a fixed rate for 1,3,5 years while var rates drop over the coming months.

People have been saying this for years and it hasnt happened.

The market here is what it is. Few players and they're all trying to make large profits to offset a considerable portion of non performing loans already on their balance sheets.

Unless real competition enters the market, I don't think anything overly dramatic will happen. All we've seen so far are a few sub prime lenders, but no real competition for the main banks.

DD, if it sounds like a good deal for you, then go for it.

iainBB

SarahMollie wrote: »

People have been saying this for years and it hasnt happened.

The market here is what it is.

People "may" have been saying this for years but the facts are different now a days.
Many banks are starting to offer fixed rates and locking customers in now much lower then their var rate. why is this changed all of a sudden.
One big switch has struck a deal with UlsterBank for a low locked in fixed rate if you switch and stick with them.
In the news there is plenty of references to new players in the mortgage sector in Ireland
In the news euro rate are way low compared to Ireland rates.
Euro central bank rates are at an all time low and not moving any time shortly.
all signs point to var rates going down

fix if you want stay with var if you want. it is of course your decision.
we can only talk about it here and give you the facts.

SarahMollie

iainBB wrote: »

People "may" have been saying this for years but the facts are different now a days.
Many banks are starting to offer fixed rates and locking customers in now much lower then their var rate. why is this changed all of a sudden.
One big switch has struck a deal with UlsterBank for a low locked in fixed rate if you switch and stick with them.
In the news there is plenty of references to new players in the mortgage sector in Ireland
In the news euro rate are way low compared to Ireland rates.
Euro central bank rates are at an all time low and not moving any time shortly.
all signs point to var rates going down

fix if you want stay with var if you want. it is of course your decision.
we can only talk about it here and give you the facts.

You've provided no specifics and are saying nothing new.
Who are these new players? I can only think of one and they're subprime. They're not competing with AIB, BOI etc.
They might go lower, but then DD is paying at her higher Std Var rate while he/she sits back and tries to game the market.
Instead, what I'm advocating is for DD to look at the numbers and see if they can live with them for the period of 2 years. Is the reduction on their current rate worth locking in for that amount of time.
Its always possible that things will change, but 2 years is not forever, and if the rates do go lower, it will be gradual.

Certainly I wouldn't be advocating for anyone to fix for 5/7 years or anything like that, but for 2 years, at that rate, I don't think thats half bad.

iainBB

SarahMollie wrote: »

You've provided no specifics and are saying nothing new.
Who are these new players? I can only think of one and they're subprime. They're not competing with AIB, BOI etc.
They might go lower, but then DD is paying at her higher Std Var rate while he/she sits back and tries to game the market.
Instead, what I'm advocating is for DD to look at the numbers and see if they can live with them for the period of 2 years. Is the reduction on their current rate worth locking in for that amount of time.
Its always possible that things will change, but 2 years is not forever, and if the rates do go lower, it will be gradual.

Certainly I wouldn't be advocating for anyone to fix for 5/7 years or anything like that, but for 2 years, at that rate, I don't think thats half bad.

Nothing new a no specific, why bother

what was not new? one big switch( 19 April 2016 ) what is new to you
http://www.irishexaminer.com/ireland/one-big-switch-gets-better-mortgage-offer-from-ulster-bank-393717.html

call for similar mortgage switching 25th of April 2016
http://www.irishtimes.com/business/personal-finance/call-for-simpler-mortgage-switching-1.2624219

new leader 24 April 2016
http://www.independent.ie/business/personal-finance/new-lender-aiming-to-undercut-banks-on-mortgage-rates-34652870.html

Not bother any more with more references
sometime arguing with people is like giving medicine to the dead.

SarahMollie

OK, first two links are nothing new. You can keep you medicine, thanks.

The rate that the One Big Switch crowd managed to achieve is not as good as what DD is being offered.

The second one is just "calls for improvement"....heard that one before alright. Do you remember Michael Noonan calling all the banks in a telling them to lower their rates? Not exactly effective.

Final one might be interesting, but they're still a way off actually operating in Ireland. It also sounds like they'll be pretty selective in terms of which customers they'll agree to take. Also, there are no dates given as to when the expect to start lending. DD could be half way through the 2 years by that point.

DD has already said they don't particularly want to switch lenders anyway.

D_D

I don't to start a 'fact vs. fiction' war on Boards, but I suppose I am siding with SarahMollie. Why wait to play the market when I am currently being offered a way better deal as is for two years? I have been playing the waiting game for three years already and haven't come out the better, even with the current mantra that 'variable rates will definitely drop, they have to'.

If they are going to drop, they will be still there in two years time, and I will avail of them then. Or fix again.

Also, it isn't worth my hassle to switch mortgage providers during the two years I'm 'locked' into the BOI mortgage as I don't think there will be other providers going crazily below the 3.35% I am being offered.

athtrasna

Mod note
That's enough bickering folks. This is not about scoring points or taking sides. Posters are asked to remain civil and to post in accordance with the forum charter.

Thanks

kodak

Would appreciate thought's on this one!

1st time buyer

Offer 1: 200K >80% LTV - 3.75% variable (25 years)
Offer 2: 200K >80% LTV - 3.65% fixed for 5 years with 4K cash back (20 years or 25 years)

I would have ability to overpay variable so I would probably take the fixed over 20 years...

newacc2015

SarahMollie wrote: »

People have been saying this for years and it hasnt happened.

The market here is what it is. Few players and they're all trying to make large profits to offset a considerable portion of non performing loans already on their balance sheets.

Unless real competition enters the market, I don't think anything overly dramatic will happen. All we've seen so far are a few sub prime lenders, but no real competition for the main banks.

DD, if it sounds like a good deal for you, then go for it.

Frank Money is seeking a license from the central bank to start issuing mortgages by Q3 this year. Competition is entering the market now and they are promising to slash rates.

A foreign bank could open here tomorrow and take advantage of the lowest savings interest rates in Europe and one of the highest mortgage interest rates tomorrow. If you were a German bank, you would literally have double the margin on mortgage lending in Ireland versus Germany

Ask yourself, why would a bank wanting to maximise revenue want you to save money by fixing your mortgage? I would imagine they are expecting a competitor to cut their rates

iainBB

newacc2015 wrote: »

Frank Money is seeking a license from the central bank to start issuing mortgages by Q3 this year. Competition is entering the market now and they are promising to slash rates.

A foreign bank could open here tomorrow and take advantage of the lowest savings interest rates in Europe and one of the highest mortgage interest rates tomorrow. If you were a German bank, you would literally have double the margin on mortgage lending in Ireland versus Germany

Ask yourself, why would a bank wanting to maximise revenue want you to save money by fixing your mortgage? I would imagine they are expecting a competitor to cut their rates

Agree
The problem is mortgage rates change very slowly some waiting for the last 3 years has gotten no where. they got an offer now to fix and thank it's a good idea.

I was on to my bank yesterday about changing their rate down to below 3.3 var. They where very happy to discuss it.

newacc2015

BOI shares are down as investors are worried that the new Government plans might mean they have to cut their variable rate

http://www.irishtimes.com/business/financial-services/bank-shares-fall-as-investors-rattled-by-new-government-plan-1.2637591

No bank is going to try and save its customers money. I would be surprised if BOI cuts their variable rates in a few months due to pressure

Villa05

SarahMollie wrote:

I'd put the question straight to BOI, but I don't believe the assertion above.

SarahMollie wrote:

Also, there isnt just one Variable Rate. There are multiple rates depending on your LTV.

It is correct and is in the small print. LTV rates are a different product to standard variable. BOI are very sneaky and have cunning ways of catching you out. Short term gain for long term pain should be there motto

I would advise on holding off on fixing long term. The new government have been tasked with shaking up the market by trying to make it much easier and cheaper switch plus downward pressure on variable rates.
It will probably be a government survival issue this time round

iainBB

more news on this front.

mortgage rates are going to be cut.

http://www.irishexaminer.com/business/squeeze-on-saving-rates-as-mortgage-cuts-loom-398802.html


I was to to my Bank yesterday about a var rate cut to below 3.3 percent.

iainBB

As I said variables rate will be cut shortly


more evidence of a variable rate cut coming down the line and why the bank have offered the fixed rate to customer to suck them so they can no benefit from the rate cute.


http://www.independent.ie/business/personal-finance/property-mortgages/banks-slash-interest-rates-on-mortgages-in-fear-of-new-lender-frank-money-34721268.html

cocoa123

Just wondering if I can get your opinions on the following offer from the bank:

I'm currently choosing between 3 options with new UB rates for LTV <80%

1. 3-year fix 2.99% (Fix does not allow over-payments, however it's unlikely I'd be able to make over-payments withing next 3 years)

2. var 3.1%. (can leave to fix rate at anytime)

3. split between two above

Does it worth for fix for 3 years now? The option of var with possibility to fix look me more attractive because the gap between var and fix is only 0.11% and with only one var rate move down would set a parity. Also if rates continue to go down further I would be able to fix lower than current 2.99%. But I can be wrong as I have no clue in banking just simple maths analysis.
Cheers!

draiochtanois

This post has been deleted.