Keep or not keep a tracker

bubbatj

Hi all,

Looking for some opinions here rather than expecting an answer as I'm going round in circles a bit myself. Long story short we're aiming to trade up from an apartment (bought in 2006) to a house. We're currently on a 1.7% tracker and the bank will allow us to keep the tracker +1% (so 2.7% overall) on the balance of the existing mortgage with the remainder needed to be effectively a separate loan at current mortgage interest rates. Having gone through the numbers there's no major difference in monthly costs between transferring the tracker (option 1) and going on a 3/5 year fixed rate (option 2). This of course depends on what you assume will happen to ECB rates!

So on the one hand while ECB rates will go up over the next few years and increase the cost of option 1, keeping a tracker will put a cap on exposure after the fixed rate term given the way Irish banks have increased variable/ fixed rates following ECB rate changes. Having said that given the existing premium banks are getting in the Irish market, is it likely the things might equalise over time and while the ECB rate will increase, the Irish bank premium will decrease over the same period.

Another complicating factor is that option 2 qualifies us for the 2% back on the total loan amount and that isn't available when keeping the tracker.

Like I said, not expecting anyone to have the answer but any views are welcome so I can continue wrecking my head about this! Sorry about this kind of rambling post but any views on this welcome!

TLDR: Keep a (not great) tracker and miss out on 2% cash back but limit exposure to possible future rate increases or go fixed on the full mortgage and risk the full impact of future rate changes once the fixed rate term is over?

uck51js9zml2yt

Interest rates are going to go up.
Stick with the tracker.
You've no guarantees after the fixed term.

bubbatj

Wells Cuddly Rebel wrote: »

Interest rates are going to go up.
Stick with the tracker.
You've no guarantees after the fixed term.

Thanks, that’s the way I’m leaning but good to hear it from someone else!

corky2004

hi folks

i'm trading up from a 2006 tracker ECB + 1.25% and face the same question.

The bank will let me keep my tracker if they add 1%. i.e. it would start @ 2.25%.
But alternatively I can fix for 10 years @ 3.3%.

Some economists predict it will take 12-24 months for ECB base rate to reach 1% so the fixed rate will start out more expensive but if we get another bubble the fixed rate will be way cheaper than ECB + 2.25%.

Another interest rate peak of 4.5% would mean 6.75% interest and cost me about 5k more per year than 3% fixed. If that happens I could be kicking myself saying I should have fixed it when it was cheap.

On the flip slide, after the 10 years there is no option to return to the tracker.

Pity we can't get 20 year fixed mortgages like in Europe.

Has anyone got a crystal ball to look into the future :D:D

pwurple

How long a term is this mortgage?
Tracker plus 2.7% isn’t great at all tbh... aib’s variable rate is 2.75% at the moment. There is no major forecast for interest rate hikes in the next year... I would be tempted to ditch it if there was something better on the table.

However, is the only other thing on the table fixed?

My big problem with a fixed mortgage, is you can’t overpay it (some have conditions where you can overpay by 1% or more, so check). I always try to pay a mortgage down as quickly as I can, much faster than the term agreed, to avoid interest. So every bonus goes in, every scrap of money left at the end of the month gets swept, any raise in income in etc. lump sums can arrive from an inheritance, a redundancy pack, an insurance claim, a savings bond maturing.

Askthe EA

I dont think I'd ever give up a tracker if I had one....

Turbohymac

Jesus I'd definitely hold onto that tracker even though it's quite high compared to my current 0.8 tracker