Fixed or Variable

Trotsky00

Hi,

We are finalising the purchase of our first house at the moment. A question from the bank has come up do we want to go fixed or variable. I know this has prob come up before but the market is changing all the time. I really have no idea about these things.

Which would people recommend? Any advice is really appreciated.

Thanks

advertsfox

What bank are you with for the mortgage? Some focus on better fixed deals vs variable. I'm in the same position for a 2nd mortgage and am choosing to stick to fixed for 5 year at 3% with BOI. Their variable options are at 4.3%.

Trotsky00

We are going with AIB. From my limited knowledge fixed seems better as you don't know what the market may do?

Wheety

I recently fixed for 5 yeas with KBC at 2.6%.

advertsfox

Trotsky00 wrote: »

We are going with AIB. From my limited knowledge fixed seems better as you don't know what the market may do?

That's my comfort as well, I'll happily switch to variable but more towards the end of my mortgage - stick to the fixed at the start to get used to the amount I'm paying. Sure, I can't overpay it right now but I can switch / renew after the timeframe or even earlier in some cases. The banks have to show / offer us the best rates now too.

AIB seem to have fixed / variable rates all around 3.2%-3.5%.

https://aib.ie/our-products/mortgages/mortgage-interest-rates

Trotsky00

Thanks for the replies. Good to hear I'm not barking up the wrong tree!

Wheety

advertsfox wrote: »

That's my comfort as well, I'll happily switch to variable but more towards the end of my mortgage - stick to the fixed at the start to get used to the amount I'm paying. Sure, I can't overpay it right now but I can switch / renew after the timeframe or even earlier in some cases. The banks have to show / offer us the best rates now too.

AIB seem to have fixed / variable rates all around 3.2%-3.5%.

https://aib.ie/our-products/mortgages/mortgage-interest-rates

I'm on a fixed and I'm overpaying. Some banks allow a certain amount. KBC allow 10% of the balance to be paid during the fixed term.

advertsfox

Wheety wrote: »

I'm on a fixed and I'm overpaying. Some banks allow a certain amount. KBC allow 10% of the balance to be paid during the fixed term.

Thanks I really didn't know this. Turns out with Bank of Ireland (who I'm with) regular overpayments of up to 10pc of the normal monthly repayment (or up to €65, whichever is greater) can be made without triggering a break fee.

Must get some calculations done to see how much this could shorten the mortgage by over the 30 years

EDIT: Just found the BOI overpayment calculator. By adding the max €65 month, we'd save €13,302.43 in interest with a term reduction of 2 years, 2 months. Wow!

randombar

I did part fixed part variable allowing me to up the overpayments by whatever I liked.

I should have overpaid by more at the start. Makes less difference ten years in.

Wheety

advertsfox wrote: »

Thanks I really didn't know this. Turns out with Bank of Ireland (who I'm with) regular overpayments of up to 10pc of the normal monthly repayment (or up to €65, whichever is greater) can be made without triggering a break fee.

Must get some calculations done to see how much this could shorten the mortgage by over the 30 years

EDIT: Just found the BOI overpayment calculator. By adding the max €65 month, we'd save €13,302.43 in interest with a term reduction of 2 years, 2 months. Wow!

Yeah it's crazy. At the start it's mostly interest you're paying so paying extra off the principle makes a massive difference.

We're 3.5 years into our mortgage now. Initially at 3.2% variable. Switched in 2017 to a 5 year fixed at 3.05%. Had to get a valuation done which cost €130 but we were saving €50 a month.

Then recently switched again to 2.6%. Another €130 on valuation but saving another €50 a month. This time we also added an over-payment of €200 a month. Can't remember exactly but think a calculator I tried said it would cut 5 years off the mortgage.

The new one is also a 5 year fixed. Unless the rates drop down to 2.4% or less, we'll stick with it this time. We didn't have to pay a break funding fee to get out of the first fixed rate. Always worth asking your bank if that's a reason for not switching.

The KBC over-payment allowance (10%) is based on the mortgage at the time of fixing. So if you still owed €180k then your total over-payment during the fixed term would be €18k. For a 5 year fixed, this would be €300 a month.


Edit: Just tried a calculator and it says we'd knock 7 years off our mortgage if we kept up the over-payment. And save around €20k in interest.

Trish56

AIB offer the cheapest variable rates in the market however their fixed rates are not competitive. As rates are expected to increase around September I would wait and see as I reckon AIB to be competitive will have to reduce their fixed rates sooner rather than later.

Trotsky00 wrote: »

Thanks for the replies. Good to hear I'm not barking up the wrong tree!

boardtc

Wheety wrote: »

I recently fixed for 5 yeas with KBC at 2.6%.

Also did same.

randombar

Trish56 wrote: »

AIB offer the cheapest variable rates in the market however their fixed rates are not competitive. As rates are expected to increase around September I would wait and see as I reckon AIB to be competitive will have to reduce their fixed rates sooner rather than later.

Not sure if rates are going to increase this year looking at germany and things slowing down.

Cape Clear

GaryCocs wrote: »

Not sure if rates are going to increase this year looking at germany and things slowing down.

Give it another 12 months I would think.

BrokenArrows

Fixed is a much better option in my opinion as you know exactly what your financial obligations are.

Shefwedfan

Just about to fix at 2.6% with KBC for 5 years.

Any real disadvantage for a long time?

randombar

Shefwedfan wrote: »

Just about to fix at 2.6% with KBC for 5 years.

Any real disadvantage for a long time?

They're pushing me to fix for that length too, I'm thinking only two years myself but my mortgage isn't massive. If I wanted to move to another bank and get another switching deal I can do in two years without a breakout clause.

Shefwedfan

GaryCocs wrote: »

They're pushing me to fix for that length too, I'm thinking only two years myself but my mortgage isn't massive. If I wanted to move to another bank and get another switching deal I can do in two years without a breakout clause.

They haven't contacted me at all.....the misses was going 2 years but I hate the fact you have to get valuation everytime which is a bit of a scam


I don't expect the rate to reduce in 2 years. But it is so hard to tell

randombar

Shefwedfan wrote: »

They haven't contacted me at all.....the misses was going 2 years but I hate the fact you have to get valuation everytime which is a bit of a scam


I don't expect the rate to reduce in 2 years. But it is so hard to tell

No rate reduction probably but if you could get 2% cashback to switch to another bank on the same rate then it might be worth it.

KBC valuation is 125.

Solicitor fees kill a lot of it but it still might be worth it.

JTMan

Trotsky00 wrote: »

Hi,

We are finalising the purchase of our first house at the moment. A question from the bank has come up do we want to go fixed or variable. I know this has prob come up before but the market is changing all the time. I really have no idea about these things.

Which would people recommend? Any advice is really appreciated.

Thanks

Cashback with EBS --> Switch --> Cashback with PTSB --> Switch --> Cashback with BoI --> Switch to 2.20% with Ulster Bank.

Wheety

GaryCocs wrote: »

They're pushing me to fix for that length too, I'm thinking only two years myself but my mortgage isn't massive. If I wanted to move to another bank and get another switching deal I can do in two years without a breakout clause.

You probably won't have to pay any break fee. I didn't when I changed rate recently, from a fixed rate. Also if the wholesale rate has increased since you fixed the fee would be 0.

randombar

Wheety wrote: »

You probably won't have to pay any break fee. I didn't when I changed rate recently, from a fixed rate. Also if the wholesale rate has increased since you fixed the fee would be 0.

Can you explain that a bit more? Currently looking to break out of one year into a five year with BOI and he's talking about 700

Shefwedfan

Wheety wrote: »

You probably won't have to pay any break fee. I didn't when I changed rate recently, from a fixed rate. Also if the wholesale rate has increased since you fixed the fee would be 0.

How did you manage that? if you have a fixed rate then you cannot change till the end of the contract. That's the whole point of it

If you break it then the bank will charge you a sum of money for finishing the contract. Usually the sum is more than any potentially savings you might make by breaking it

Wheety

To both of you, you just won't know until you ask your bank. I was 1 year into a 5 year fixed term and contacted my bank for the break funding fee. They told me this would be €0. I fixed again for another 5 years at a much better rate.

It's based on the bank's wholesale rate and if the rate has not dropped, your fee should be €0. If rates have increased, it'll definitely be €0. They can't charge more than it would cost them and the formula will always give €0 if rates have increased.

KingCong

Shefwedfan wrote: »

How did you manage that? if you have a fixed rate then you cannot change till the end of the contract. That's the whole point of it

If you break it then the bank will charge you a sum of money for finishing the contract. Usually the sum is more than any potentially savings you might make by breaking it

This is usually true but not so the last couple of years with changes to how breakage fees are calculated and low interbank rates. I've broken out of fixed rates twice in 2 years both for 0 breakage fee.

boardtc

GaryCocs wrote: »

KBC valuation is 125.

Solicitor fees kill a lot of it but it still might be worth it.

I never used a solicitor for fixing and revaulation, I just filled a one page form and paid €130 for valuation. I get that back in 3 months with money saved because of reduction.

randombar

boardtc wrote: »

I never used a solicitor for fixing and revaulation, I just filled a one page form and paid €130 for valuation. I get that back in 3 months with money saved because of reduction.

Changing banks you do.