Switching from tracker to fixed

Argo foc yourself

I am currently on a tracker and it is increasing to 3.65% on Feb 1st. I know I probably should have done this already but going to switch to fixed.

The thing is I don't know whether to go 4 or 7 year - 4yr fixed at 3.1% or 7yr fixed at 3.55%

Any thoughts or opinions?

angel eyes 2012

https://www.boards.ie/discussion/2058278230/switching-from-tracker-to-fixed

We are somewhat similar.

On 2.4% tracker, can't recall raise due in February. We have been offered 3.1% for 4 years and 3.55% for 7 too. Would be a significant increase in our case, but the current economic uncertainty and ongoing high inflation makes it difficult to predict.

micar

Speak to a mortgage broker.

They may stay and stick out the increases due this year.

The rates (hopefully) will start to come back down to where having the tracker would benefit you especially if you've 15+ years left on mortgage

So.....short term pain for long term gain

Geuze

https://www.boards.ie/discussion/2058278230/switching-from-tracker-to-fixed

I advise you to be careful.

Your decision depends on the size of mortgage and remaining term.

Read this: https://www.askaboutmoney.com/threads/tracker-mortgage-holders-can-save-by-switching.229790/

The ECB rate could peak at 4% in 2023, yes, and it could stay there for a while, yes.

But, you never know, the ECB could be back down to 2.5% within another year.

the_amazing_raisin

It's worth remembering that most fixed rates will only allow you to overpay by a max of 10% during the fixed term

But that varies across lenders, KBC would only allow one overpayment for the term, whereas UB would allow an overpayment per calendar year

Depending on how much you owe, 10% could be more than you'd be overpaying in a year, if you decide to do that at all

But it is something you'll want to keep in mind for deciding between the 4 and 7 year

Also, shop around. I assume there's nothing in the terms of a tracker that would stop you from switching banks if another has a better rate?

the_amazing_raisin

FYI, bonkers.ie have a mortgage comparison tool which can help show your monthly payments from different banks

walterking

3.65% suggests a tracker of 1.15%

Remember when rates fall back as they will, you fall back immediately.

If you move out of your tracker, you cannot go back and after the fixed rate ends you are subject to the rates your bank has then.

If you have 10 years or less left on your mortgage term, the balance at the end of a 7 year fixed will be small, so the rate has less affect.

If you have 15 or more year left, be VERY careful. Banks like a margin of circa 2% - your tracker is 1.15%. My own belief is you will be better off sticking with the tracker at this point. A little pain for a couple of years, but overall, I believe it will be the better choice

(If you asked 3 months ago when there was a 10 year 3% rate, I'd have looked at taking that)

walterking

https://www.boards.ie/discussion/comment/120066287#Comment_120066287

When you say 2.4% tracker - is this 2.4% above the ecb rate and therefore your current interest rate is 4.9%? If so, your tracker has no value whatsoever and don't think about it for one minute

However if you have not had the letter stating the feb increase yet and your tracker is 0.4%, then you have an amazing deal. Possibly the Jan letter did not arrive either ( I got two notifications in 3 days) and therefore your tracker is 0.9%

The "Tracker Rate" as most understand it, is the percentage rate you pay above the ECB rate. Thus "Tracker rate" does not change - but the ecb rate does and the interest you pay is the "Tracker rate" PLUS the ECB Rate.

If your tracker is 1.25% or less, then long term it will prove to be correct to stay put.

Hellrazer

Im in the same boat ECB + 1.15%

Im sticking it out with the tracker as I feel that since 2013 or Ive basically gotten the mortage for very little interest. The rates might peak at 4% this year and stay there for a bit but I can weather it out.

One piece of advice I was given by a very close financial advisor years ago was to "keep that tracker and dont let anyone convince you to get rid of it even if rates go up as a tracker will usually work out a lot cheaper over the full course of a mortgage"

15 years in and I reckon that was decent advice.

Argo foc yourself

yeah 10 years left on mortgage. about 120k remaining. Didn't realise there is a limit on over paying when fixed. Maybe better to weather the storm and stick with the tracker?

danoriordan1402

Same here with ECB + 1%, had it since 2009 so will ride it out for a bit having been on the gravy for years.

walterking

https://www.boards.ie/discussion/comment/120073668#Comment_120073668

in your case its borderline as if you went for 7 year fixed you'd just have 3 years left and the interest rate would make little difference on the small balance at that point.

10% overpayment with no penalty. You can over pay more but there could be a small penalty.

But overall its not a big difference for you no matter what you choose, so probably stay put.

Hellrazer

Inflation dropped again last month so maybe the ECB will slow down its rate rises to see if the EU zone has peaked inflation wise.

1wizards sleeve

Was starting to consider this myself but iv a low mortgage. 97k and 14 years left. .75% above the ecb. In a position now to reduce the years by paying off e5000 and hopefully do similar amounts annually to get it cleared in 8 years i think ill stay with the tracker . The flexibility is a major benefit

SeeMoreBut

The cynic in me is saying banks are targeting tracker mortgages to try and get people off their trackers onto fixed or variable as they’ve been slower to raise them.

Maybe I’m going crazy but that’s just my gut feeling

walterking

https://www.boards.ie/discussion/comment/120075462#Comment_120075462

no, if anything they have avoided mentioning trackers at all. Also if you do look at moving from a tracker, they make it very clear that you lose your tracker and get you to accept that.

The banks have BILLIONS on deposit and are paying depositors very little and don't see any reason to increase this as they could lose a large amount of deposits and still have more than enough

walterking

https://www.boards.ie/discussion/comment/120075445#Comment_120075445

0.75 is well worth keeping.

Many in the market think the ECB will be back at 2% or lower by mid 2024. Core inflation is a concern but the lower gas and energy prices are only feeding into factory gate pricing now, so core inflation should also drop sooner that they expected.

Market is now pricing max two 0.5% increases in ECB - Feb & May/June

Thefact

Get financial advice before ditching tracker and switching to a fixed rate, expert warns

https://www.independent.ie/business/personal-finance/property-mortgages/get-financial-advice-before-ditching-tracker-and-switching-to-a-fixed-rate-expert-warns-42268596.html

walterking

https://www.boards.ie/discussion/comment/120077703#Comment_120077703

Padraic is superb and probably the most sensible and straight talking financial advisor out there and is absolutely correct that if you have 15 (I'd be saying 12 or more) years left and your tracker is 1.25% or less, do not switch. Even at 1.5%, it will be in your favour

But is you are one of the PTSB people paying 3.25% above ECB, your tracker is actually costing you and should be ditched immediately

Similarly if you moved house and had a mover tracker where they added a further 1% and your tracker is 2% or more over ECB, then it no longer has the value it once had as you can get fixed and variable rates that are generally 2% or less over the ecb without difficulty and that won't change.

the_amazing_raisin

https://www.boards.ie/discussion/comment/120073668#Comment_120073668

It depends on how much you're willing or likely to overpay

If the limit is 10% per year (just an example, depends on the bank) then in year 1 you can overpay a max of €12k, year 2 around €10k and so forth

If you're planning to put €5k a year into the mortgage then the limit won't make a difference. If you're planning to put €20k in, then a fixed rate would be a bad idea

You can use a mortgage amortization calculator to figure out what you'd be able to put in every year. There's a few online and Excel versions on the internet

I'm definitely wary of the longer fixed rates for this reason, especially when they're not friendly towards overpayments

For example KBC only allowed one overpayment for the whole fixed term, to a max of 10%.

Avant only allowed a 1% overpayment per year, so basically no point in planning any overpayment

the_amazing_raisin

https://www.boards.ie/discussion/comment/120078371#Comment_120078371

Yeah there's a lot of guessing the future involved in the decision. Fixed and variable rates are also following the ECB rates, they just aren't tied to them in the same way as a tracker

So fixed rates today aren't going to be any better than a tracker

The question is what happens next. If the ECB raises rates again then having the fixed rate will protect you from that

But if the ECB lowers rates, then you lose out

So it depends on what happens next

There's a lot of people saying things either way, so it's up to you who to believe. Honestly I wouldn't think less of someone flipping a coin on it

danoriordan1402

0.5% today and same again in March planned - makes it more interesting now. I will have another look at the figures i think.

walterking

https://www.boards.ie/discussion/comment/120192687#Comment_120192687

You have a 1% tracker, keep it.

You will be higher for a while and there will be another 0.5% in March, but the feeling is that's the top and you will see rates starting coming down in 2024.

We are near the top of the cycle and remember the tracker falls immediately when the ECB drops the rate.

Banks historically have had their mortgage rates 1.5%-3% above ECB over a medium term. That will not change. Hence 1% tracker will always be best value overall especially as you may have about 15 years left.

the_amazing_raisin

AIB were certainly quick to raise their rates in line with the ECB. Doesn't really seem to be any better option than a tracker at the moment, unless you've a time machine and can get a fixed rate from 2 years ago