What Term to Fix Rates At?

willabur

We went sale agreed on a house next week. The Bank have asked us what rate / term they want us to fix our mortgage at. Some background. We are getting married next year so we would like to save as much as possible for it, we would also like to put other case into setting up the house (it is turn key but we need to buy furniture etc)

The current offerings we see at the moment are

2.3% for 2 years Ulster Bank
2.6% for 4 years UB

the difference between option 1 and 2 is 60 euro per month. Our initial idea is to go for the first option and save the money for the wedding etc and then fix again. Are we mad not to go for the 4 year option with Brexit etc going on ? extra bit of predictability for 60 euro per month?

handlemaster

I would go for the longes fixed term possible.can you get ten years. I though there was a bank offering that ?

aloooof

handlemaster wrote: »

I would go for the longes fixed term possible.can you get ten years. I though there was a bank offering that ?

My understanding is BOI are offering 3.5% for 10 years fixed.

cruizer101

BOI and KBC both offer a 10 year fixed but the 2.6% with UB is a good deal a full 1% lower than the 10 year options. Most people don't think rates will fall much but even if they stayed the same and you got the same again in 4 years you would save a lot compared to the 10 year.

Between the 2 and 4 year, its hard to know, I'd be inclined to go with the 4 year fixed just for the security of knowing what you are paying for the bit longer. But really there is no 100% right answer

Captain Flaps

We fixed for 5 years with KBC, I would have preferred 10 but the monthly payments were that bit too high considering. Pretty happy with 5 years fixed at 3.3%

Fian

cruizer101 wrote: »

BOI and KBC both offer a 10 year fixed but the 2.6% with UB is a good deal a full 1% lower than the 10 year options. Most people don't think rates will fall much but even if they stayed the same and you got the same again in 4 years you would save a lot compared to the 10 year.

No, most people don't think they will fall much, most people think they will rise, which would mean you will not get the same rate to "roll over" in 4 years time. It is not a question of either falling or staying the same.

OFC nothing is certain. Fixed rates are about buying certainty, for you and for the bank. If interest rates swings were entirely predictable there would be less need for fixed rate products, they would only be for smoothing cashflow not for hedging against rate rises.

iluvfatfrogs

Any sort of increase in rates will mean the extra you'll be paying from 24months - 48 months will outweigh the €60 saving you'll achieve on the 2.3% - I'd be going 4 years too.

awec

We went for 5 for predictability.

I wouldn’t fix for 10, seems too long. IMO anything beyond 5-6 years is just total guesswork as to what the market will be like.

Mike3549

iluvfatfrogs wrote: »

Any sort of increase in rates will mean the extra you'll be paying from 24months - 48 months will outweigh the €60 saving you'll achieve on the 2.3% - I'd be going 4 years too.

Well you dont know that.
I think only IF it increases by 0.7 (€120 a month) after 24 months, you will end up paying more in the 4 year period.
Dont forget that you can break the fixed term with almost no penalty lately.
I would go with 2.3 but thats just me,
Im on svr atm, will fix once i hear about any increases.

aloooof

Mike3549 wrote: »

Well you dont know that.
I think only IF it increases by 0.7 (€120 a month) after 24 months, you will end up paying more in the 4 year period.
Dont forget that you can break the fixed term with almost no penalty lately.
I would go with 2.3 but thats just me,
Im on svr atm, will fix once i hear about any increases.

There's also the option to fix at 2.3% for the 2 years and overpay by the €60 or so when you can. (BOI allow overpayment up to 10% on Fixed rates). Might give you some flexibility. It's unlikely to be significant, but it would also mean that, after the 2 years, you'd have less capital to pay back, therefore the variable rates would need to go up by more than the 0.7 mentioned above to end up paying more.

iluvfatfrogs

Mike3549 wrote: »

Well you dont know that.
I think only IF it increases by 0.7 (€120 a month) after 24 months, you will end up paying more in the 4 year period.
Dont forget that you can break the fixed term with almost no penalty lately.
I would go with 2.3 but thats just me,
Im on svr atm, will fix once i hear about any increases.

Yep , I agree, but 3% is hard found today in today’s markets so I think it’ll be very hard found in two years.
Also I haven’t seen much evidence of no breakage fees, in my own situation with AIB I’ve 12 months left of a 36 month fixed term and they are charging me €1k+ to break

handlemaster

To me its a no brainer fix for ten years.Rates will only go up.ecb will raise next year. When the next property crash comes you will have certainty

ted1

handlemaster wrote: »

I would go for the longes fixed term possible.can you get ten years. I though there was a bank offering that ?

I wouldn’t. I’d take the smaller one and over pay it to match what a fixed term would be.

2.3 v 3.5 over paying will help reduce the capital and then when things do start going up you can move to a different bank or fix or keep on a variable

ted1

handlemaster wrote: »

To me its a no brainer fix for ten years.Rates will only go up.ecb will raise next year. When the next property crash comes you will have certainty

Far from a nine brainer, there a rates war kicking off

handlemaster

ted1 wrote: »

handlemaster wrote: »

To me its a no brainer fix for ten years.Rates will only go up.ecb will raise next year. When the next property crash comes you will have certainty

Far from a nine brainer, there a rates war kicking off

A little tickle for the papers to think theres real competition in the irish market. Dig this post up 12 months time. Ten year deals now on offer will be looked upon as been the deal that got away

ted1

handlemaster wrote: »

ted1 wrote: »

handlemaster wrote: »

To me its a no brainer fix for ten years.Rates will only go up.ecb will raise next year. When the next property crash comes you will have certainty

Far from a nine brainer, there a rates war kicking off

A little tickle for the papers to think theres real competition in the irish market. Dig this post up 12 months time. Ten year deals now on offer will be looked upon as been the deal that got away

New legislation in the pipeline to make switching easier and banks have to advise you of lower rates that are available.
Our fixed rates are stil no where near the rest of Europe. They’ve room to come down further. But in the meantime pay off capital with the difference and fix if things start to move

Villa05

awec wrote:

I wouldn’t fix for 10, seems too long. IMO anything beyond 5-6 years is just total guesswork as to what the market will be like.

Fixing for as long as possible when rates are close to record lows is a smart no brainer financial decision

Mike3549 wrote:

Well you dont know that. I think only IF it increases by 0.7 (€120 a month) after 24 months, you will end up paying more in the 4 year period. Dont forget that you can break the fixed term with almost no penalty lately. I would go with 2.3 but thats just me, Im on svr atm, will fix once i hear about any increases.

The fixed rate will have adjusted higher long before you hear about SVR increases.

ted1 wrote:

Our fixed rates are stil no where near the rest of Europe. They’ve room to come down further. But in the meantime pay off capital with the difference and fix if things start to move

In the rest of Europe if you stop paying your mortgage the house is repossessed quickly and at low cost. This is not the case in Ireland and those that are paying cover the cost of those non performing mortgages through higher mortgage rates

I believe the 10 year rate has started to increase this year

Q&A

I think the combination of low rates and ability to overpay by 10% of the outstanding balance each year makes Ulster a really attractive option. The overpayment flexibility is a benefit that goes under the radar but it really does go some way to combining the certainty of fixed rates with the flexibility of variable rates.

Arguments for both cases here. I went with the 2.6% 4 year but the low 2 year rate wasn't around at the time. You could always split your mortgage some fixed for 4 years some for 2.

Alternatively, if you're a safe bet for mortgage approval across banks go with BOI/EBS/PTSB. Yes it will be more expensive but they offer 2% cashback and Ulster will take you after 6 months. The higher payments for 6 months will be nothing compared to the cashback. Ulster will also contribute €1500 towards the switching costs as well.

cruizer101

Q&A wrote: »

I think the combination of low rates and ability to overpay by 10% of the outstanding balance each year makes Ulster a really attractive option.

That was my thinking alright I would plan to overpay by a few hundred per month over the 4 years I've fixed. I'm nearly sure overpayment wasn't an option with KBC 10 year or was severely restricted. Not sure about BOI.

Q&A wrote: »

Alternatively, if you're a safe bet for mortgage approval across banks go with BOI/EBS/PTSB. Yes it will be more expensive but they offer 2% cashback and Ulster will take you after 6 months.

I'd never considered the option of switching so soon, potentially sounds a good idea though I'm not sure I could have dealt with the stress of it and although I havn't got keys yet I think I'm too far in to consider at this stage.

mugsymugsy

I got in the 10 year fix with KBC at 2.99% before they increased that rate - for our circumstances it was a reduction on our current fixed rate and then the added certainty. Also our break fee was 0.

Some good points made here about taking shorter period and overpaying but everyone's circumstances are different.

mugsymugsy

cruizer101 wrote: »

That was my thinking alright I would plan to overpay by a few hundred per month over the 4 years I've fixed. I'm nearly sure overpayment wasn't an option with KBC 10 year or was severely restricted. Not sure about BOI.

You can overpay up to 10% on KBC fixed rate

Q&A

mugsymugsy wrote: »

You can overpay up to 10% on KBC fixed rate

You can overpay 10% of the principle with Ulster whereas with others (including KBC) it's 10% of the monthly repayment amount.

Purple Sheep

Q&A wrote: »

You can overpay 10% of the principle with Ulster whereas with others (including KBC) it's 10% of the monthly repayment amount.

I fixed with KBC last year and can overpay 10% of the principal - but it's over the full term of the fixed period. So, if you owe 200k and fix for 2 years you could overpay 20k over the 2 years or about 10k/year.

Homesick Alien

handlemaster wrote: »

A little tickle for the papers to think theres real competition in the irish market. Dig this post up 12 months time. Ten year deals now on offer will be looked upon as been the deal that got away

As long as you don't want to move house for the next 10 years

daheff

ted1 wrote: »

Our fixed rates are stil no where near the rest of Europe. They’ve room to come down further.

And our banks have a higher cost base/cost of funding than European banks..so there isn’t a lot
Of room for rates to drop further.

Also the risks taken by Irish banks are higher than faced by European banks. It’s a lot harder to evict a non payer in Ireland than in other European countries.

daheff

OP, if you really can’t decide what to do, put half of the mortgage on variable and half fixed.

handlemaster

Homesick Alien wrote: »

handlemaster wrote: »

A little tickle for the papers to think theres real competition in the irish market. Dig this post up 12 months time. Ten year deals now on offer will be looked upon as been the deal that got away

As long as you don't want to move house for the next 10 years

If its a PPR non issue.

handlemaster

handlemaster wrote: »

Homesick Alien wrote: »

handlemaster wrote: »

A little tickle for the papers to think theres real competition in the irish market. Dig this post up 12 months time. Ten year deals now on offer will be looked upon as been the deal that got away

As long as you don't want to move house for the next 10 years[/qu

If its a PPR non issue.
If your one of those fence sitters. Stay renting

Turkish1

iluvfatfrogs wrote: »

Yep , I agree, but 3% is hard found today in today’s markets so I think it’ll be very hard found in two years.
Also I haven’t seen much evidence of no breakage fees, in my own situation with AIB I’ve 12 months left of a 36 month fixed term and they are charging me €1k+ to break

I have 36 months left of a 60month fixed term and it is costing me €29 per €100k of mortgage to break. Currently in the process of moving to PTSB

iluvfatfrogs

Turkish1 wrote: »

I have 36 months left of a 60month fixed term and it is costing me €29 per €100k of mortgage to break. Currently in the process of moving to PTSB

That’s very cheap breakage free- which bank you leaving?

willabur

Q&A wrote: »

Alternatively, if you're a safe bet for mortgage approval across banks go with BOI/EBS/PTSB. Yes it will be more expensive but they offer 2% cashback and Ulster will take you after 6 months. The higher payments for 6 months will be nothing compared to the cashback. Ulster will also contribute €1500 towards the switching costs as well.

Surely there must be something to prevent you from doing this. There would be droves of people leaving the cashback banks going to ulsterbank as soon as they pay out

Fian

I would definitely fix for a long period, except that i expect i may want to sell in the coming years, so i need to stay on SVR.

If a full blown trade war kicks off between EU/US that would result in interest rates not rising, staying at these record lows, but i really don't expect to see any further falls. We are allready at negative interest rates for wholesale funds.

Cyrus

willabur wrote: »

Surely there must be something to prevent you from doing this. There would be droves of people leaving the cashback banks going to ulsterbank as soon as they pay out

there isnt i got cashback from EBS and BOI before fixing at 2.5% for 5 years with UB

autumnbelle

Fian wrote: »

I would definitely fix for a long period, except that i expect i may want to sell in the coming years, so i need to stay on SVR.

If a full blown trade war kicks off between EU/US that would result in interest rates not rising, staying at these record lows, but i really don't expect to see any further falls. We are allready at negative interest rates for wholesale funds.

This maybe a stupid question but why do you have to stay on a svr if you want to sell?

Cyrus

autumnbelle wrote: »

This maybe a stupid question but why do you have to stay on a svr if you want to sell?

worried about breakage fees i assume

cruizer101

Cyrus wrote: »

there isnt i got cashback from EBS and BOI before fixing at 2.5% for 5 years with UB

Do you mean you drewdown with EBS got your cashback, went to BOI got you cashback (maybe other way around) and then went to UB.
Fair play if you did that, I thought the cashback was only available on brand new mortgages not transfers.
I have to admit I'm a bit jealous, not sure I could deal with the stress.
Did you have approval from all three initially or did you just apply to ulster when you were a while into mortgage.

Fian

autumnbelle wrote: »

This maybe a stupid question but why do you have to stay on a svr if you want to sell?

As poster above states - you have to pay to break a fixed rate mortgage. the fixed rate mortgage allows the bank to take out fixed rate borrowings to fund it - they need the interest repayments to meet teh payments on their back to back borrowings/their commitment fee. Consequently you generally have to pay over the interest you would have paid over the term of the fixed rate to break the fixed rate contract / repay the mortgage. and of course you need to redeem the mortgage before you can sell.

So generally 3 elements to consider before fixing a mortgage:

1: are you happy you are ok to lose the flexibility to overpay/pay off the mortgage during the term/incurr the break fees.

2: do you think you will get better value over the term (depending on whether interest rates go up or down and by how much would you be better/worse off on a SVR)

and,

3: Is the certainty/security of the payments valuable enough to you that you think it is worthwhile on balance notwithstanding the risks of 1 or 2 working out against you.

Fian

cruizer101 wrote: »

Do you mean you drewdown with EBS got your cashback, went to BOI got you cashback (maybe other way around) and then went to UB.
Fair play if you did that, I thought the cashback was only available on brand new mortgages not transfers.
I have to admit I'm a bit jealous, not sure I could deal with the stress.
Did you have approval from all three initially or did you just apply to ulster when you were a while into mortgage.

These contracts originally had a clause preventing you from transferring (or rather clawing back the cashback offer if you did). I can't remember if it was the central bank, FSO or the courts who decided those clauses could not be enforced against consumers and that they were entitled to transfer notwithstanding the clawback clauses.

One thing to bear in mind about the cashback - it is functionally equivalent to a 2% lower interest rate for the first year of the mortgage. Which probably sounds a little less impressive than a 2% cashback.

hinault

If you can fix for the longest term on offer that you can afford, I would do so.

At present, and compared to historical data, we are in an ultra low bank interest rate environment today.
How long this environment will last is difficult to predict.

If I recall accurately the ECB had said that it would start to raise interest in 2019, at it's latest press conference. But how certain is that forecast?

My own personal viewpoint is that the ECB has little or no room to raise interest rates. The macro economic environment is still too fragile in my view. But with interest rates increasing in the USA (and Canada) pressure on the ECB could force it to start increasing rates regardless.

Cyrus

cruizer101 wrote: »

Do you mean you drewdown with EBS got your cashback, went to BOI got you cashback (maybe other way around) and then went to UB.
Fair play if you did that, I thought the cashback was only available on brand new mortgages not transfers.
I have to admit I'm a bit jealous, not sure I could deal with the stress.
Did you have approval from all three initially or did you just apply to ulster when you were a while into mortgage.

i did exactly as you stated in your first line, cashback available to switchers too.

it wasnt stressful at all to be honest, i did them one at a time, but the better approach appears to be to apply to all 3 simultaneously. Did it over about 12 months.

Cyrus

Fian wrote: »

As poster above states - you have to pay to break a fixed rate mortgage. the fixed rate mortgage allows the bank to take out fixed rate borrowings to fund it - they need the interest repayments to meet teh payments on their back to back borrowings/their commitment fee. Consequently you generally have to pay over the interest you would have paid over the term of the fixed rate to break the fixed rate contract / repay the mortgage. and of course you need to redeem the mortgage before you can sell.

So generally 3 elements to consider before fixing a mortgage:

1: are you happy you are ok to lose the flexibility to overpay/pay off the mortgage during the term/incurr the break fees.

2: do you think you will get better value over the term (depending on whether interest rates go up or down and by how much would you be better/worse off on a SVR)

and,

3: Is the certainty/security of the payments valuable enough to you that you think it is worthwhile on balance notwithstanding the risks of 1 or 2 working out against you.

with the new formula the breakage fees at the moment for recently fixed mortgages re negligible.

iluvfatfrogs

Cyrus wrote: »

i did exactly as you stated in your first line, cashback available to switchers too.

it wasnt stressful at all to be honest, i did them one at a time, but the better approach appears to be to apply to all 3 simultaneously. Did it over about 12 months.

to put figures on it, for example,

Drew down a €250k mortgage, received €5k in cash back (or against principle) from Bank 1.
Switched after a few months to Bank 2, received close to €5k in cash bank off them too.
And then in a few more months, switched to UB for a low interest fixed term?

Cyrus

iluvfatfrogs wrote: »

to put figures on it, for example,

Drew down a €250k mortgage, received €5k in cash back (or against principle) from Bank 1.
Switched after a few months to Bank 2, received close to €5k in cash bank off them too.
And then in a few more months, switched to UB for a low interest fixed term?

correct, it was a larger mortgage so made sense to do it as the cost to change was 1,400 in solicitor fees.

UB as well as having the best rate also give you 1.5k when you switch to them so they cover the legal costs.

jester77

Fian wrote: »

As poster above states - you have to pay to break a fixed rate mortgage.

It would depend on the deal you negotiate with the bank.

I fixed part of my mortgage for 20 years, after year 10 I can break at no cost or re-negotiate to extend the fixed term any time between year 10 and 20 if rates are more favourable for me.

Turkish1

Cyrus wrote: »

correct, it was a larger mortgage so made sense to do it as the cost to change was 1,400 in solicitor fees.

UB as well as having the best rate also give you 1.5k when you switch to them so they cover the legal costs.

Not sure when you went through this process. Not sure it would be quite as easy anymore, e.g. PTSB wont entertain a switcher unless have been with current bank for 2 years. I am assuming it is to deter this exact thing - would think this may be a consistent approach from the banks offering cash back up front which can't be clawed back.

Cyrus

Turkish1 wrote: »

Not sure when you went through this process. Not sure it would be quite as easy anymore, e.g. PTSB wont entertain a switcher unless have been with current bank for 2 years. I am assuming it is to deter this exact thing - would think this may be a consistent approach from the banks offering cash back up front which can't be clawed back.

Between December 16 and December 17/Jan 18

People are doing it today as well bit more sophisticated than I was as they are getting approval from all banks at the same time and with the help of a friendly solicitor you can complete the switches quickly

KBD85

Fian wrote: »

No, most people don't think they will fall much, most people think they will rise....

Why do people think interest rates will rise?

I believe our mortgage interest rates are already the highest in the EU so could foreign banks lend to use and the added competition would drive down interest rates?

Cyrus

KBD85 wrote: »

Why do people think interest rates will rise?

I believe our mortgage interest rates are already the highest in the EU so could foreign banks lend to use and the added competition would drive down interest rates?

foreign banks dont lend here because of the difficulty in repossessing assets (amongst other impediments)

Claw Hammer

KBD85 wrote: »

Why do people think interest rates will rise?

I believe our mortgage interest rates are already the highest in the EU so could foreign banks lend to use and the added competition would drive down interest rates?

Foreign banks were here for a few years, then got out. They sold off the loans they had given out for a fraction of the recoverable value. Don't be coming here anytime soon. Interest rates can only go one way at the moment. That is up. It is not a question of if they will go up, but when. The Irish banks are still in a very weak financial situation and will charge what they can in order to rebuild their balance sheets. In short, there are two virtual certainties. The first is that interest rates will rise at some point in the near term, and the second is that Irish banks will protect their profit margins on mortgages.

I recently fixed for 5, 10 was a tad too much of a gamble for me as I'd traditionally be against fixing conceptually.
Also I'm overpaying significantly as well so in 5 years time there shouldn't be more than a few years left of the thing. If rates go up significantly I'd hope to be able to just clear it rather than go on a higher rate.

aloooof

Augeo wrote: »

I recently fixed for 5, 10 was a tad too much of a gamble for me as I'd traditionally be against fixing conceptually.
Also I'm overpaying significantly as well so in 5 years time there shouldn't be more than a few years left of the thing. If rates go up significantly I'd hope to be able to just clear it rather than go on a higher rate.

I'd be interested in what Bank you're with if you can fix and overpay significantly? We're with BOI and can overpay by a max 10% per month. Currently, we can't afford more than that anyways, but would be good to know.