Fixed Rate coming to end

Kav_Piero

Hi all I know this question has probably been asked a lot but I'm struggling to make a decision on the whole variable vs fixed conudrum

Bought my first home 3 years ago during the height of Covid and settled on a 3 year fixed rate at 2.35%

3 Year term is coming to end and the situation is as follows

Current monthly repayments: €1,038

New Rates Offered:

Variable: 3.55% €1,224pm

Fixed 5 Year: 4.05% €1,306pm

Fixed 10 Year: 4.55% €1,390pm

Fixed 1 Year: 3.95% €1,290pm

Fixed 2 Year: 3.95% €1,290pm

Fixed 3 Year: 4.05% €1,306pm

Am I mad to be thinking of switching over to a variable rate?

Doop

We're in the same boat coming to the end of a 5 yr term. We're going to leave it on variable for 6-12 months and try and lock in a fixed rate when they improve. (we're obviously taking a risk that rates will go down but that was our decision based on initial thoughts and then subsequent professional advice received.)

Gael23

Go variable. Rates will begin to fall in a few months time

JVince

https://www.boards.ie/discussion/comment/121795362#Comment_121795362

ECB rate will start falling in June. However, quite unusually, the current mortgage rates here bear no resemblance to ECB rates due to the high level of deposits and the low deposit rates.

Hence a variable rate almost 1% BELOW the ECB rate.

I would definitely take the variable rate. This is very flexible and if you see fixed rates drop towards 3% , you can switch to that immediately. But that's unlikely until next year.

But don't expect the 3.55 rate to drop at any point until the ECB is at 2% - and that could take a couple of years or more.

accensi0n

Jesus. Didn't realise they had gone up so much. No looking forward to my 1.95% ending! 😦

J_1980

Avant is doing lifetime fix @3.95.

I doubt rates will drop as much as people think.

Aus/NZ were the first CB to raise rates back in 2022 when everyone else was still running QE, ie the canary in coal mine. There is talk the next move could be up again there instead of down. Rest might follow again….

https://www.interest.co.nz/economy/126306/anzs-sharon-zollner-says-reserve-bank-could-shock-new-zealand-lifting-official-cash#:~:text=ANZ's%20Sharon%20Zollner%20says%20the,50%20basis%20points%20to%206

herbalplants

Why is everyone so sure that rates will be falling? Because of few newspaper articles?

Sierra Oscar

https://www.boards.ie/discussion/comment/121797369#Comment_121797369

Primarily because both the Federal Reserve and European Central Bank have given explicit guidance that they expect to begin lowering interest rates as the year progresses.

JVince

https://www.boards.ie/discussion/comment/121797369#Comment_121797369

ECB has stated that they ideally want to have inflation at 2% and interest rates would be neutral to that with a negative bias. In plain language the market reads that as 1.5%-2%.

The ECB (and Fed and Bank of England) do not try and trick the market, but also they will not set future decisions in stone as anything can happen in a geo political way.

The day of 0% is almost definitely gone unless there's a deep recession (no sign)

The market has priced in about 0.75%-1% drop this year and up to 1.5% next year. Might be more, might be less but it will pan out to be ballpark. Exactly as the market got most of the rate increases correct.

The ECB knows what the market is pricing in and if they thought it was out of skelter as the Bank of England did late last year, they will make a comment on it to reign in expectations.

Unusually, we are lucky here with current variable rates as they are below ECB rates - anyone taking the variable rates (good decision) should not expect any reduction in the variable rate until the ECB rate moves about 1% below what you are getting - so if a 3.55% rate is costing €1,224 a month, budget in for €1224 a month until at least 2026

Kav_Piero

Just a quick update, I ended up choosing the variable rate in the end.

Anyone know if it’s possible to overpay by adding the mortgage account as a payee i.e. can you add your mortgage account as a payee on the BOI app and just transfer money over every now and again?

whatever76

https://www.boards.ie/discussion/comment/121798940#Comment_121798940

Yep this is how I do it now as I went variable myself last nov - ask bank for details though as money goes into a mortgage holding account I think first ( they will give you the IBAN that you set up ) and you then add your Mortgage account number as reference & add a description as well to be on safe side . When set up be sure to test it out with a small figure first to ensure its working - take 2/3 days before you see it in the balance ..once all working you are good to go !!

Gael23

https://www.boards.ie/discussion/comment/121795428#Comment_121795428

Get your point but banks will come under pressure to undo rate increases they imposed

Padre_Pio

https://www.boards.ie/discussion/comment/121805904#Comment_121805904

How often to banks bow to pressure?

Hope for the best, but plan for the worst.

JVince

https://www.boards.ie/discussion/comment/121805904#Comment_121805904

If they imposed all the ECB rate increases, the standard variable rate would be 6%-6.5% at a minimum. In the UK where the Bank of England is 0.75% higher than the ECB, the average standard variable rate is a whopping 7.5%, but you can get 5 year fixed for about 5%.

You can thank the inertia of the tens of thousands of customers with deposits in the banks earning 1% or less and not making a tiny little effort to move their money to a high interest account where they would get close to 4%. It is because of these low rate deposits that the banks can offer some of the lowest mortgage rates in Europe (never thought I'd say that!!!)

They will not / cannot drop these deposit rates even if the ECB rate drops, hence there is virtually no chance of any downward movement in variable rates that are in the 3.5-3.7% area for the next 18months - 2 years - but be thankful those rates are available.

Fiona

I would go variable and sit it out, I too thinks rates will go down slightly in the future.

SharkMX

We are close to drawdown. Going to fix for 5 years. Better the devil you know :)

J_1980

https://www.marketwatch.com/livecoverage/january-cpi-report-s-p-500-futures-weaken-ahead-of-inflation-data/card/-supercore-inflation-is-real-worry-in-the-cpi-bS3Gw9L5BmjIwS0USx64

us supercore inflation is ticking up and red hot. 3m annualised rate is at 6.7%

there might not be any rate cuts this year.