Aib Fixed rate : 3 or 5 years

nino1

We are being offered a mortgage from aib with fixed period for 3 or 5 years at 2.55%
I know it can change but whats the consensus at the moment as to whether it would be better to be on fixed for a longer period or shorter period?
thanks

ms vieria

nino1 wrote: »

We are being offered a mortgage from aib with fixed period for 3 or 5 years at 2.55%
I know it can change but whats the consensus at the moment as to whether it would be better to be on fixed for a longer period or shorter period?
thanks

Market expectations are that intersted rates in Eurozone are not going up in the short - medium term. Interest rate rises are priced more than 5 years out. I would take the 3 year rate - hoping to have the option then to tie to 3/5/7/10 years at fixed rate prior to those rises(if they ever come about).

AngryLips

ms vieria wrote: »

Market expectations are that intersted rates in Eurozone are not going up in the short - medium term. Interest rate rises are priced more than 5 years out. I would take the 3 year rate - hoping to have the option then to tie to 3/5/7/10 years at fixed rate prior to those rises(if they ever come about).

Are you sure? Governments pumping billions into the economy as a result of this pandemic which will lead to higher inflation and central banks will increase interest rates in response.

dotsman

Exactly, there is a lot of talk of rising interest rates to combat the trillions that have been pumped in to western economies.

JPup

No one knows for sure as you can see by the answers, so it comes down to your own preference really.

My two cents is that I'm skeptical rates will rise. Italy would be bankrupt if the ECB starts raising rates.

dotsman

JPup wrote: »

No one knows for sure as you can see by the answers, so it comes down to your own preference really.

My two cents is that I'm skeptical rates will rise. Italy would be bankrupt if the ECB starts raising rates.

Unfortunately, Italy's (and Ireland's) woes have nothing to do with ECB rates. EU-wide inflation is all that matters when determining rates.

To be honest, I'm not saying it will happen either. But there is a lot of talk kicking off at the moment, and it certainly is one plausible outcome. Basically, you can't pump trillions into the western economy and everything stays the same. Something will have to give, and a rise in inflation is certainly one potential impact.

dotsman

Just noticed this article from last night in my feed and thought of this thread. Obviously, it's about US, but it's the same story in EU.

Green Mile

When your fixed period ends, the bank will move you to a higher variable rate. Research what that rate will be, could be more than 3% I’d say.
You can switch at that point but be mindful you’ll need a solicitor so there’s fees to consider.
I’d prefer a 5 or 7 year fixed myself.

antix80

If you like certainty and you're not planning on moving, 5 years is the best option.
If banks hike variable rates (which can happen independently of ecb rates) they'll usually hike fixed rates too. In 2008 ptsb hiked var rates for customers in neg equity or ltv of over 80% to over 6%.they offered fixed rates of over 10%.
If there's any chance of being in negative equity or unable to switch you do not want to be at the mercy of your bank.

So, id say fix at least 5 years.

Milena009

We decided on fixing for 3 years with KBC. Seems to be popular choice with FTB

silver2020

Green Mile wrote: »

When your fixed period ends, the bank will move you to a higher variable rate. Research what that rate will be, could be more than 3% I’d say.
You can switch at that point but be mindful you’ll need a solicitor so there’s fees to consider.
I’d prefer a 5 or 7 year fixed myself.

To be totally correct - the DEFAULT rate you move to is the standard variable rate, but that's only if you sit back and don't look at your options and choose a rate to suit you.

That has always been the way but most people will look at the options open to them and fix again for a further period or look at what LTV variable rates are available.